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Amendment, by leave, withdrawn.

Lord Bach moved Amendments Nos. 114 and 115:

On Question, amendments agreed to.

[Amendments Nos. 116 and 117 not moved.]

Clause 37, as amended, agreed to.

Clause 38 [Fixed monetary penalties: procedure]:

Lord Goodlad moved Amendment No. 118:

The noble Lord said: I shall speak also to Amendment No. 119, in my name and in the names of the noble Lord, Lord Razzall, and the noble Baroness, Lady Hamwee. Under the Bill as drafted, regulators will be

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able to impose fixed monetary penalties without first serving a notice of intent or giving the individual or company involved a chance to make written representations and objections. By contrast, regulators will have to provide a notice of intent in the case of variable monetary penalties. As the Select Committee on the Constitution says in its report on this Bill,

or her—

Under the Bill, the onus will be on the individual or company to seek an internal review and then to appeal after the regulator has made its decision. Your Lordships’ Select Committee concluded:

In his letter to me, as chairman of your Lordships’ Select Committee, the noble Lord, Lord Jones of Birmingham, said:

If that truly is the Government’s intention for fixed monetary penalties, that should clearly be in the Bill rather than in non-statutory guidance because statute should reflect reality. Putting it in guidance is not sufficient.

Pat McFadden, the Minister in the other place, said in his letter to the Joint Committee on Human Rights:

I respectfully submit to this Committee that it is simply not good enough to say, as the Minister does, that this may in practice occur. People should have a right to make representations before the penalty is imposed. The amendments would require the regulators to serve a notice of intent before imposing a fixed monetary penalty and to allow the implicated party to make written representations and objections to the regulator. I beg to move.

Lord Razzall: I support the amendment proposed by the noble Lord, Lord Goodlad, which also stands in my name and that of my noble friend Lady Hamwee. As the noble Lord said, the amendment raises a significant point of principle. It is appropriate that he comes here as chair of the Select Committee. Had his committee’s recommendations not predated the meeting of the Regulatory Reform and Delegated

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Powers Committee when we were about to consider the matter, we would have made exactly the same points in that committee as the noble Lord, Lord Goodlad, did with his committee. I entirely agree with the comments that he made in relation to the comment of the noble Lord, Lord Jones of Birmingham, that the provision is intended to be used only for minor offences. If that is the case, it should be clearly stated in the Bill as the noble Lord said, rather than left to unenforceable ministerial guidance.

That point goes very much to the concern that the noble Lord made earlier about the reaction of the public. You have only to see the reaction of the public when there is some question of mistaken identity with regard to a motoring or a parking offence. I would not believe that the regulators in our modern, multi-ethnic world will always get the names right of the people on whom they are seeking to impose albeit a small penalty. This raises a fundamental point of principle on the human rights of our citizens, and I have delight in supporting the amendment that the noble Lord, Lord Goodlad, has proposed.

Viscount Colville of Culross: I see that four amendments of mine to Clause 41 have been grouped with this. I do not know whether the Committee would like me to deal with this now; if so, I shall.

I have looked at the Explanatory Notes. Clause 41 does not now deal with fixed monetary penalties but discretionary ones and other discretionary requirements. Here we have again a notice of intent. The Explanatory Notes to Clause 41 make it perfectly plain that this is a method of setting out a power to negotiate between the regulator and the person who is said to have committed an offence. They can drop it and impose some alternative requirement; they can do a large number of things. It is not for me to say that we should not have these things in the Bill; I wish that we had a lot more in the Bill, including the exemptions that we dealt with on Monday. The criteria that we have just discussed will apparently not get into the Bill—but at least we have a scheme here whereby negotiation can take place.

I have two questions. First, are these requirements in Clause 41(3) and (4) compulsory? If so, I suppose that the Government have weighed up the extra burden being placed on the regulator—the local authority, probably—and have decided that they are going to have to put up with it. In this case, they will get their costs, because it is covered by Clause 51. But what happens if they make a mistake?

Clause 41(3) has a very interesting provision, which says:

Then under subsection (5) it says:

this, that and the other.

I think that the Government have anticipated most of the things that are likely to arise in the negotiations. I remember in my very early days at the Bar defending a baker, one of whose customers had found a bit of a brick in the bun or loaf that had been

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sold. The baker’s defence was that it must have come like that from the wholesaler, because that is where he got his bread or buns from. In those days, that was a good defence, which I think is provided for in one of the provisions at the top of page 18.

However, is the Minister sure that all the necessary defences and circumstances have been taken into account? I very much doubt it because the notice of intent under subsection (2)(c) is individual rather than general, but subsection (4)(b) states,

So it is general. He is allowed to take into account, or not take into account, anything that may be relevant. In other words, there is no real list of things that have to be taken into account. There are some, and they must be included because that is what it says. What happens if they are not included? Does that mean that the person against whom these proceedings are being taken—taking proceedings in the broadest possible sense—will be able to say, “Ah, but you see, you haven’t complied with the notice of intent and therefore I am not going to deal with you any more; I am not going to comply with the discretionary requirements”? Is that what is intended? If so, it is putting a pretty substantial burden on the local authority to get every single item of this right and, if it thinks fit, to add some more. This needs a bit more explanation, and I would be very grateful if the Minister would give it.

6.30 pm

Lord Selsdon: I support these amendments wholeheartedly, but in particular subsection (7) of Amendment No. 119 because the information that is being made available to the regulators is often false. They do not collect it properly. In almost every item of government legislation we could have something that means there are mitigating circumstances: the decision was based on an error of fact, was wrong in law or was unreasonable. I have always liked the phrase, “may not unreasonably be withheld”. There are mistakes in identities—the noble Lord will forgive me, but he has been kind enough to promote me to being an earl; I wish it were so. Mistaken identity happens often. The word “unreasonable” should be incorporated in almost everything because the mistakes that are made by regulators and local authorities are not usually intentional, but are often based on misinformation or misunderstanding, so I support the amendment tabled by my noble friend Lord Goodlad and the noble Lord, Lord Razzall. It might help to correct a Bill that could possibly be unwittingly unjust.

Lord Lyell of Markyate: I, too, support the amendment. The words,

appear in this amendment and in the Government’s legislation. Can the Minister tell us what we are likely to get by way of “the grounds”? I do not want to debate a later amendment now, but to what extent are all the facts and matters going to be included in the grounds?



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Lord De Mauley: I support Amendments Nos. 118 and 119 tabled by my noble friend Lord Goodlad. They tackle the important problem of the need for fairness, which is otherwise lacking in the Bill. In this case, it could be aided by notice being given about the proposed fixed penalty and by an opportunity for representations to be made by the accused. I appreciate the argument about the need for balance, but our country has hitherto always been held in high regard worldwide for its fairness in the execution of its legal system. What a tragedy it would be if that reputation were prejudiced by sledgehammer legislation. My amendments in the next-but-one group also go to this point. All the amendments in this group point out an inconsistency between how variable and fixed penalties are to be operated, and it occurs to me that I might pull the Minister’s leg for his ardent espousal in an earlier debate of the need for consistency, in that case, across the country. This situation exposes that the Government’s alacrity to achieve consistency goes only so far.

Lord Bach: The Committee is grateful to the noble Lord, Lord Goodlad, for coming both in his own right and as chairman of the powerful and important committee that he chairs. I shall deal with his amendments first.

The noble Lord’s amendments are unnecessary and I will explain why. It would not be appropriate to add a “notice of intent” stage to the process for imposing fixed monetary penalties as this would unnecessarily lengthen the process for imposing such penalties and would undermine one of the key benefits of the notice, which is the swiftness with which the sanction can be imposed. Of course, it can be appealed against once it has been imposed, but for the type of case being considered for fixed monetary penalties there is a strong argument in everyone’s interests for it to happen quickly rather than slowly.

I know I am repeating myself, but an important subject has been raised in this debate. Fixed monetary penalties are designed to be used for low-level incidences of non-compliance and the regulator will have no discretion in setting the level of penalty. For example, as the guide makes clear—I appreciate that the guide is not the Bill—it is envisaged that fixed monetary penalties will be used for strict liability offences: cases where liability is satisfied simply by the commission of a particular act without any intent.

Fixed monetary penalties may also be used to address simple instances of non-compliance which may or may not involve culpable conduct. Examples could include failure to hold a licence for a particular activity or failure to ensure that food labelling on individual items complies with current legislation. These penalties are not intended to be used for more serious or complex instances of non-compliance.

I obviously refer to the safeguards to protect against misuse of these penalties. A regulator will need to set out its case against the person subject to the sanction and be satisfied beyond reasonable doubt that an offence has been committed before it imposes a fixed monetary penalty. That is an important safeguard which has been talked about a lot this afternoon.

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There remains the need to be satisfied beyond reasonable doubt before a fixed monetary penalty can be imposed.

The noble and learned Lord, Lord Lyell, asked about “the grounds”. That refers both to the fixed monetary penalties and the discretionary penalties in this part of the Bill. It is an important question. The grounds for imposing the discretionary requirements—and this is also true for the fixed monetary penalties—should set out the main facts and matters relied upon by the regulator. It will set out the case against the business. We will discuss this in further detail later on.

This may or may not be right—the noble and learned Lord will remember this—but there were cases in criminal courts where the grounds of the case were effectively set out in shorthand. The allegations were in a paragraph. I imagine it will be at that level, rather than anything more detailed, but certainly no less detailed.

A business will, of course, have the opportunity to defend itself—as the noble Lord, Lord Goodlad, knows—by internal review of the decision to impose the penalty. Macrory himself said that internal review should be the first stage of the appeal process. The business can make representations and objections as part of this process. The regulator must withdraw the penalty if the business has satisfied the regulator that it has a defence. The regulator must also give reasons for its decision on internal review, ensuring some transparency and accountability of decision making. If the sanction is upheld and the business is still not content, it may appeal to an independent tribunal. I emphasise that that second limb of appeal is of considerable importance in establishing a safeguard for this penalty.

I suspect that my next point will be met with a mixed reaction from the Committee. Any money from fixed monetary penalties received by a regulator must be paid into the Consolidated Fund and the regulator will not be able to recover its costs by imposing fixed monetary penalties. This will ensure, among other things, that there is no perverse financial incentive for regulators to impose fixed monetary penalties instead of other sanctions.

Introducing a “notice of intent” stage—as the amendment does, as the noble Lord said in moving it—would undermine the usefulness of the sanction and add a layer of complexity disproportionate to the nature of the types of non-compliance it is designed to address. It should be remembered that there is an opportunity for business to make objections and representations. Adding a “notice of intent” stage is unnecessary given the safeguards that exist and the type of—using the broad phrase—offences that will have been committed.

The amendments of the noble Viscount, Lord Colville, would remove the “notice of intent” stage from discretionary requirements. Discretionary requirements, unlike fixed monetary penalties, will be imposed following more serious and complex instances of regulatory non-compliance. The regulator will have more significant powers at its disposal and much more discretion in the level of penalty that it can set. In light of that, and as Professor Macrory recognised, the process for imposing these sanctions should be different from the fixed

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monetary penalty and a business should be given the opportunity to make objections and representations before the final notice is imposed.

Following the issue of a notice of intent, the business may, for example, make submissions disputing the facts and evidence relied upon by the regulator. They may also make representations about the nature and detail of the requirement to be imposed upon them. It is also an opportunity for the business to offer enforcement undertakings or to volunteer action to benefit third parties affected by their non-compliance—the point that the noble Viscount was making—such as compensation to victims, so as to mitigate the sanction. It is therefore an integral part of the procedure for discretionary requirements.

I make it clear that the “notice of intent” stage is not solely to allow business, to use the noble Viscount’s word, to negotiate. It is to allow the business to make fundamental objections to the imposition of the sanction by arguing that it has a defence. It may also make representations about the nature of the discretionary requirement. Hopefully, this will allow a more consensual approach to enforcement.

We think that there will be a consensual approach to fixed monetary penalties. In the real world, there will in many cases be conversations between the regulator and those who are regulated before a fixed monetary penalty emerges. It is not that the process will somehow become extraordinarily formal, but there is an advantage in swiftness in the kind of cases we are dealing with under fixed monetary penalties. However, the need for a notice of intent is, on balance, appropriate for the other discretionary elements of variable monetary penalties.

6.45 pm

Viscount Colville of Culross: The noble Lord dealt with part of my point. I do not think that he is correct, because it is a negotiation. One has to look only at Clause 41(5) to see that the person against whom the notice of intent is served can offer all sorts of alternative solutions to the problem. I do not see any reason why he should not do that. So it is a negotiation and I do not resile from that word. But what happens in two respects? First, what other provisions can the regulator include as being taken into account under subsection(4)(b)? He can include totally unspecified provisions. What are they? That has not been answered. Secondly, what happens if the terms of subsections (3) and (4) are not exactly complied with? The use of the word “must” is relevant. The noble Lord has not dealt with that matter, either. Can he please tell me, because “must” has presumably been put in on purpose to make that matter compulsory? What happens if a mistake is made?

Lord Bach: If they make a mistake, as can happen with any notice of intent, the regulator party has a defence, because the matter has not properly been brought forward for the civil sanction. It may be that the local authority can put right its mistake, depending on the time limits involved, but a bad notice of intent remains a bad notice of intent. The noble Viscount

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will know much better than me that that can fatally damage a course of action that the local authority wants to take.

He said earlier that this imposes too high a burden on the local authority to get the matter right in each case. I would argue that it does not. We are talking here about discretionary penalties that may hit businesses particularly hard. There may be good reasons why they should hit businesses hard, but anyone who is going to do that should make sure beforehand that everything is in order and done according to law. That is why we do not resile from the tough conditions set out in Clause 41.

Viscount Colville of Culross: What can they do under Clause 41(4)(b), which is totally unspecified? Can the noble Lord give me some examples of what they can do?

Lord Bach: I understand that the purpose of subsection (4)(b) is to allow new defences to be created against the imposition of discretionary requirements. And that is why “may” appears at the start of Clause 41(4)(b).

Lord Goodlad: I thank the Minister for the thoroughness with which he has answered this debate, but I fear that he has not succeeded in meeting the point about hearing both sides of a case before making a decision, which is a basic principle of common law. I shall study with great care what he said, as will other noble Lords, prior to further proceedings on the Bill. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 119 not moved.]

Lord Cope of Berkeley moved Amendment No. 120:

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