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On my Amendments Nos. 114 and 115, the Delegated Powers and Regulatory Reform Committee, in its report on the Bill, recommended that the level of fixed monetary penalties should not exceed the maximum amount payable if the offence had been tried summarily. In practice, we would expect fixed monetary penalties to be reserved for more minor instances of non-compliance but, in any event, the Government are happy to accept that recommendation, as I do in those amendments.
The noble and learned Lord’s Amendment No. 117 would cap the level of fixed monetary penalties at half the maximum amount of the fine that would be available in the courts. The Macrory review recommended that, as a general principle, penalties should seek to capture the financial benefit made from regulatory non-compliance. That has been one of the failings. Sometimes in quite well publicised cases, the penalty from the court has not meant anything other than that the company—the regulated body—has made quite a large profit out of its misbehaviour. Macrory wants to stop that, as I think we all do. Our fear would be—I suspect the noble and learned Lord anticipated this—that capping fixed mandatory penalties in the way proposed by this amendment would unnecessarily restrict a regulator’s ability to do that. We can imagine a case
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We entirely understand the concerns of the noble and learned Lord about the use of fixed monetary penalties. Of course, there are safeguards built into the process, but I am not going to go over that ground again; we have debated it at length today.
There will be considerable savings to business should a regulator choose to impose a fixed monetary penalty rather than pursue a criminal prosecution. In particular, business will not have to pay for legal representation before the courts, and the regulator will not be able to reclaim the costs of investigating the offence. That happens in the criminal courts, where a successful prosecuting regulator will inevitably ask for costs from the regulated person who has been convicted. That is my answer to the noble and learned Lord’s amendment.
To return to the noble Lord, Lord De Mauley, the criteria will be specified in the order made subject to the affirmative resolution procedure. Regulators will not be able to vary the criteria to be employed without a further order.
Lord Lyell of Markyate: I am most grateful to the Minister, but must confess that I am currently quite confused. I had thought that the idea of taking into account what a business has saved or extra profit it has made, or anything of that nature, was to be covered by variable monetary penalties. I see the Minister saying that that is not the case, but what is the difference between fixed and variable monetary penalties if a fixed monetary penalty can take into account the individual circumstances of the offender?
I am hypothesising, but I thought failing to get a licence for a short period would get a fixed monetary penalty; perhaps if it was for a long period, it would get a variable monetary penalty. If the regulator goes for a fixed monetary penalty which is prescribed by general criteria, however, I have not understood that to mean that one of the prescribed criteria should be whether you have made a profit by your wrongdoing, how long you have been carrying it out and so on, which is very individual and the kind of thing that gets argued about in courts. This figure is to be determined by a quite junior official, as I understand it, before it is even sent out. It is not particularly a matter of negotiation—or, if it is, it is not a statutory requirement that there be any negotiation. I will not go on, but I think the Minister is slightly driving a cart and horses through my understanding of the Bill.
Lord Bach: I hope that I am not, but I take the noble and learned Lord’s point. For example, a minor breach of a licence—having forgotten to put it in in time—might well be a prescribed amount whether it is for a massive multinational undertaking or a small business. However, there will also be carefully prepared criteria so that the regulator—and the noble and learned Lord is concerned about what they may
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Lord Cope of Berkeley: Is it a summary of the Minister’s reply to say that a fixed monetary penalty can vary?
Lord Bach: It will not be £20 in every case. If it is not £20 in every case, the answer to the noble Lord’s question is that it can vary. That is what the criteria will be there to establish. I see that the noble Viscount is about to enter the fray.
Viscount Colville of Culross: Not on that, but did I hear the noble Lord, Lord Bach, right, when he said that if you go down the monetary penalty route, whatever that may be, there is no provision for the regulator to recover costs? If so, it does not accord with Clause 51.
Lord Bach: Let me find Clause 51. As I understand it, Clause 51 does not apply to the fixed monetary penalty; it applies to the discretionary sanctions, because it is not supposed to cover the fixed monetary penalty sanction. The other sanctions are covered by it.
Viscount Colville of Culross: I simply do not understand it. We are dealing with the part of the Bill that starts with Clause 40 on discretionary requirements. Among those are the monetary penalties. I do not understand why, in that case, Clause 51 does not include the process whereby you lead up to imposing a monetary penalty, and if that is right, why should it be right? The regulator has had to incur costs to get to that stage, as he would have done had he gone to the courts. Why should he not be able to recover them? It seems ridiculous that he should not be able to do so.
Lord Bach: Clause 51 begins, “Provision under section 40”, which is where discretionary requirements appear in the Bill. By that stage, we have dealt with fixed monetary penalties, which are not what we describe as a discretionary requirement, so it does not apply to fixed monetary penalties. One of the considerations that will have to be made by the regulator in deciding what course to take is his realisation that if he goes down the fixed monetary penalty route he will not be able to recover costs.
Viscount Colville of Culross: The noble Lord cannot be right. Clause 40(3) states:
which includes this and Clause 51—
among other things. Why is it not covered by Clause 51?
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Lord Bach: That is the variable monetary penalty. No one has suggested that a fixed monetary penalty is a discretionary requirement, but a variable monetary penalty is certainly a discretionary sanction. So I maintain—if I am wrong we will know very soon—that cost recovery does not apply in Clause 51 to what we are discussing in Clauses 37 to 39.
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Lord Lyell of Markyate: From what the Minister says, unless the guidance to be given under the prescribed criteria is rather limited or arbitrary, which I am sure it is not, it sounds as though the prescribed criteria will say that you should take into account the following factors—I am making these up and there could probably be many more: whether the offender made a profit; whether it was done deliberately; the size of the business; the personal circumstances of the offender, such as illness or suffering some mishap; or whether it arose from a misunderstanding. One could go on. These are all things that a court would consider in seeking to provide a just result within the ambit of the maximum penalty. If junior officials will be required to do that as a result of prescribed criteria, would it not be a lot better to leave it to a court?
Lord Bach: We have been over why we think that it is better for good regulation to follow the Macrory principles. The kinds of criteria we consider are the size of business, which might well be in the criteria; a delay in submitting records; and the number of instances of non-compliance, such as the number of accounts that have been filed late. We do not think that criteria based on assessing financial gain are likely to be appropriate for fixed monetary penalties. If I gave that impression in what I said earlier, I was wrong. Variable monetary penalties would clearly be far more appropriate.
I understand the noble and learned Lord’s point, but the criteria set out will be pretty exact. If the regulator, junior or senior, does not follow them in deciding what the fixed monetary penalty should be, I repeat that he can be appealed against.
Lord De Mauley: I am grateful to the Minister for battling through this rather complicated area. In passing, the confusion caused by this group of amendments does not bode well for the ability of businesses—small, medium and large—to understand it. It does little to satisfy our concerns.
The Minister says that the criteria will be set down by order. He unfortunately went on to say that that will come much later. He has given us some idea, but if we could see a draft of the order itself, it might help my noble and learned friend and me considerably. We will come back to this whole area later. On that basis I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord De Mauley moved Amendment No. 113:
Clause 37, page 15, line 25, leave out “Where the relevant offence” and insert “A relevant offence must be one that”
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The noble Lord said: The purpose of Amendments Nos. 113 and 116 is to ensure that the fixed penalty procedure should be used only for relatively minor offences which, for the sake of argument, would otherwise be subject to the procedure of summary trial. It is not appropriate to use the fixed penalty procedure if an offence would otherwise be eligible for trial by jury. In such cases, things are much more complex—too complex, we feel, to be dealt with by a simple fixed penalty. This is, at this stage, a probing amendment. The enthusiasm with which we pursue it might be affected by what the Minster envisages as the maximum amount of such a fixed penalty. I beg to move.
Viscount Eccles: I wonder if this is an appropriate place to seek some clarification. Are we also talking about individual members of the public under this fixed-penalty regime? For example, if you have a surplus fridge which you want to dispose of and someone comes to collect it, the householder has to ensure that the person who takes the fridge away is licensed to do so and will dispose of it under that licence in a proper manner. Other regulations relate to compost heaps, I think, and the disposal of waste in various ways.
The reaction of members of the public to a system of fixed penalties concerns me. For example, if your tax return is late, the penalty is £100. It does not matter whether that tax return means that you owe money to the Inland Revenue or it owes you money or even that you thought that you did not have to make a return on that occasion. The penalty is £100. The public are willing, in a rather gloomy sense, to accept rough justice. The penalty is £60 if you are caught on camera going through a red light, or whatever. This discussion seems to be leading us into a much more difficult area of criteria and of varying possibilities under those criteria. It would be wise if the Government assessed the reaction of the public to different approaches to the criteria that may be used for fixed penalties.
Lord Razzall: Noble Lords will see that my name is added to the amendment of the noble Lord, Lord De Mauley. He has put succinctly the point that the amendment is an attempt to limit the powers to minor offences. It is a straightforward point. Do the Government accept that or not?
Lord Bach: Amendments Nos. 113 and 116 are similar in nature to the government amendments that I have spoken to—Amendments Nos. 114 and 115—but go a step further and would prevent regulators from using fixed monetary penalties for either-way and other offences. While of course in the vast majority of cases we would normally expect regulators to impose fixed monetary penalties for more minor instances of non-compliance, there may be—I repeat, may be—instances where a regulator might wish to impose a fixed monetary penalty in respect of an either-way offence. The amendments would remove that flexibility from the Bill.
Lord De Mauley: Could the Minister give us a couple of examples?
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Lord Bach: There are many either-way offences on the statute book. It might be that one of those offences may not be of a particularly serious nature, but it remains an either-way offence. Do we really want to exclude completely the possibility whereby any either-way offence could not be dealt with by a fixed monetary penalty? The business might well be delighted to have a fixed monetary penalty for an either-way offence rather than anything else. We do not think that we should remove that flexibility from the Bill. That is our case.
I shall deal with the timely point made by the noble Viscount, Lord Eccles. That was a reminder to us all as far as Her Majesty’s Revenue and Customs are concerned. These sanctions are aimed at businesses—including sole traders, of course—whether they are large, small or medium-sized, as someone said the other day. I hope that, for the moment at least, that answers the noble Viscount’s point.
Lord Lyell of Markyate: The Minister was talking about some very minor offences. I thought that we lived in a world in which somebody had to commit such offences at least more than once before you could prosecute it at all. Will we find that these young officials are saying, “We have an example of a minor offence and we’ve been told that we have to prosecute and up our game in the number of convictions we can get”—and hey-ho, they prosecute? Is that what is going to happen? How is that going to be covered? It would not be fair.
Lord Bach: If they went for a fixed monetary penalty, which is what we are saying should happen, and if they felt that was appropriate in this case, they would not prosecute and there would be no conviction. If they were restricted by this amendment in a case that was either way from imposing a fixed monetary penalty, prosecution might well be a more likely end product. A fixed monetary penalty might well be an act of mercy by the regulator, rather than the opposite. By the argument that the noble and learned Lord has just employed, he is really supporting my opposition to reducing the flexibility that the regulator will have.
Lord Lyell of Markyate: I do not want to go on with this too long, but I was really picking up what the Minister was saying about the whole criteria rather than the technical details of the amendment. I have been worried ever since I looked at this business of questions of penalty and levelling being dealt with by young officials under attempted efforts in statutory instruments to give detailed criteria as to how you do justice in all cases, when you cannot really temper them to the individual case. As I emphasised in my long speech before, it is an essential part of the whole prosecuting system that there has not only got to be evidence of guilt but it has to be in the public interest to prosecute. If all minor cases were prosecuted, there would be a revolution. People would just be fed up with having officials on their backs. That is a worry to me, and I hope that the Minister will persuade us that this is not in the Government’s mind—although I do not ask for a long answer now. I do not think that it is in the Government’s mind, but we might get to a position where it happened.
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Lord Bach: It certainly is not in our mind. Indeed, the whole argument about this is that there will not be prosecutions and criminal convictions as a result.
Lord Lyell of Markyate: I am using the word prosecution to mean penalties. Perhaps I should start to call them administrative penalties. It would get down people’s throats if they were getting administrative penalties all the time.
Lord Bach: I understand. It will be very important that local authorities, the regulators in this field, do not abuse their position, and we shall be watching very closely to ensure that they do not. You can be quite sure that the businesses will be watching very closely, along with their representatives. In most cases now, as the noble and learned Lord is saying, regulators use their discretion and good sense to know when to prosecute and when not to. There is no reason to believe that they will not do the same when one of the sanctions available is a fixed monetary penalty.
One of Macrory’s points was that the only alternative to prosecuting someone through the courts, with all the costs involved for the person being prosecuted in a minor case, was to do nothing about it at all, and sometimes that would be the wrong thing to do. It calls for the regulator’s good judgment. You cannot always rely on that, which is why the safeguards that we have referred to many times this afternoon are in place. I am advised that regulators will have to act in compliance with principles of good regulation in a targeted and proportionate way; if they do not, they will be subject to very severe criticism.
Viscount Eccles: Can I pursue the redundant fridge for a moment? Am I right to understand that the clause and the Bill do not cover the circumstances in which that ends up being fly-tipped by a person? We keep coming back to the question of a business, but I thought that the word “person” included individuals as well as businesses. Penalties are set out. Am I wrong to think that the Bill has an effect on the way in which those penalties may be fixed and handled? Or is it that they can be included under these clauses?
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Lord Bach: Let me be candid with the noble Viscount, who has introduced a very important point. I do not know the answer to it, and it is important that we should. We will make sure that a letter comes to him explaining the position as we see it before our next day in Committee, which is next Wednesday. I do not want to guess at an answer that may prove to be wrong. It is a pertinent point.
Viscount Eccles: Let me reinforce my earlier point. Among the public there is a willingness to accept that it may be that for some things that they do that are wrong, such as going through a red traffic light, it is more practical to pay the £60 than to go to the magistrates’ court. At that point, you have two belief systems in opposition to each other. There is a belief system that says, “On the whole, I would really rather go to a court and rely on the court for justice”, and
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Lord Desai: Surely the boundary would be a different amount of money for different people and different offences. You cannot lay that down in statute. Yes, the noble Viscount is right that there is a boundary, but that would be a behavioural judgment either by the person who is being given the monetary penalty or not, and that is not something that you can write down beforehand.
Viscount Eccles: I entirely agree with the noble Lord, and certainly my boundary is set at a much lower figure than that of some other people. That is the way that it is. That brings you into all sorts of issues about who is advantaged and who is not so advantaged, and that has a tremendous impact on public opinion and their feeling on whether justice is being achieved.
Lord De Mauley: I thank the Minister for his answer and I thank all other noble Lords who have taken part in the debate. By now the Minister is well aware of the various concerns that have been raised. We will also benefit from the debates on some of the forthcoming amendments, which go to some parts of this point. Before we decide how to proceed on this group, I will withdraw the amendment, but I reserve the right to come back to it. I beg leave to withdraw the amendment.
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