As amended in the Public Bill Committee, considered.
With this it will be convenient to discuss the following amendments:
No. 2, page 13, line 28, leave out ‘directed’ and insert ‘advised’.
No. 3, page 13, line 33, leave out paragraph (b).
No. 4, in schedule 4, page 48, line 23, leave out ‘directs’ and insert ‘advises’.
No. 5, page 48, line 28, leave out ‘direction’ and insert ‘advice’.
No. 6, page 48, line 29, leave out from ‘direction’ to direction)’ in line 30 and insert ‘advice’.
No. 7, page 48, line 37, leave out ‘a direction’ and insert ‘the advice’.
No. 8, page 49, line 2, leave out ‘direct’ and insert ‘advise’.
No. 9, page 49, line 27, leave out ‘making a determination’ and insert ‘giving advice’.
The concerns we put forward in both groups of amendments revolve around democratic rights and what I believe are the rights of companies to recourse in law. The first group deals with clause 28. In essence, the amendments would remove the blanket power of primary authorities to prevent local authorities from taking the enforcement action it sees as necessary to protect the people it serves.
The substitution of the word “direct” for the word “advise” makes a subtle shift in the relationship between the primary authority and the enforcing authority. It ensures that the relationship between the two is not simply one of master and servant, but rather of two organisations working in co-operation. After all, local authorities are at the sharp end of so many of the services that we as citizens need to live our lives. It is their enforcement activities that protect us from out-of-date food, dangerously unhygienic restaurants, buying faulty or counterfeit goods or work activities that pose a serious risk to employees or the public. Local authorities are democratically run by elected representatives, so it is not for anyone or anything to dictate any action that the authority does not consider to be in the best interests of the citizens it serves.
One could say that the Government do that to local government all the time and that the autonomy of the local authority has been eroded to the point where it often feels that it is the instrument of an increasing controlling and centralised Government. Perhaps that is true, but when local authorities are at the sharp end and see actions taking place in their patch and on their watch that affect their electorates, I believe that they should have the ability to advise any primary authority that they really do not want to stand back and do nothing.
The amendments will remove the blanket power of primary authorities to prevent other local authorities from taking enforcement action in their own areas, while ensuring that enforcing authorities will be made aware of any view on the part of the primary authority that the proposed action is inappropriate.
I am sorry to interrupt the hon. Lady’s flow. I share many of her worries. Does she agree that there is a danger that the public—consumers—will be confused by the involvement of two democratically elected authorities, one of which can overrule the other? Should we not consider that danger, as well as the question of accountability?
The hon. Gentleman has made an excellent point. Local people expect their own enforcing authorities to be responsible for matters that affect them. As it stands, clause 28 allows one local authority, acting as a primary authority in relation to a particular business, to tell another local authority that it cannot take enforcement action against that business because it considers that the business is acting in accordance with advice given to it by the primary authority. If the council that wishes to prosecute disagrees either with the advice from the primary authority or with the view that the business has followed it properly, its only recourse is to ask the local better regulation office to reconsider the matter. If the LBRO supports the primary authority, that is the end of the matter.
Enforcement action may mean a prosecution, or the issuing of a notice requiring the business to make some improvement or halt some practice. The important point is that the business has a right of appeal against such notices to a court. Whether the action is a prosecution or a notice, the principle is the same. At present a court makes the final decision, but under the clause as it stands the court’s role is removed.
The hon. Lady is making a series of powerful points. I shall certainly support her amendments, and I hope to make some points myself on Third Reading.
Is the clause not a smokescreen? We are told that it will save money, but in fact the enforcing authorities will be judge and jury, and there will be no right of appeal.
I agree. Let me give an example that I cited in Committee. Coventry council prosecuted Tesco for selling out-of-date food, and the supermarket was fined £133,000. The procedures agreed between the primary authority and Tesco were perfectly good, but they were not being implemented properly by a local store. However well run a primary authority may be, is it really best placed to say whether a business in a certain area is following exactly the advice that it has been given, or is the local authority that inspected the store best placed to do that? Equally, does the LBRO—a small, unelected and untried quango—really know better than a local authority what poses a risk to people in the area?
The amendment would give the primary authority an opportunity to advise the prosecuting authority that it does not agree with the action that it is taking, and that advice would be disclosable if the matter came to court. A business that was prosecuted or appealed against an enforcement notice would be able to produce that advice in support of its case.
Local authorities do not take enforcement action against businesses without serious thought, and a local authority that has been advised that the primary authority believes that the action should not proceed will clearly consider the matter again very carefully before allowing it to proceed. The amendment retains the provisions that prevent the authority from acting without consulting the primary authority. However, I believe that if, after consideration, a council decides to take action, it should be for a court to determine whether that action is right, not an unaccountable quango—and not another local authority which will not have to answer to the voters of say, Wolverhampton if it fails to protect them.
Defending clause 28 in Committee, the Minister said:
“Neither LBRO nor the primary authority can give a once-and-for-all answer about the legality of a particular approach. Rightly, that decision must lie with the courts.”––[Official Report, Regulatory Enforcement and Sanctions Public Bill Committee, 19 June 2008; c. 124.]
I agree with that sentiment, but the clause as it stands will deny a court the chance to rule on the proposed action if the primary authority and the LBRO veto it.
I commend the hon. Lady on her perseverance. I think I am right in saying that she tabled similar amendments in Committee, but just missed the deadline. We now have an important opportunity for us to consider the points that she has raised, several of which she expressed extremely well.
It should be borne in mind that the principles behind the amendment are supported by the Local Authorities Co-ordinators of Regulatory Services, the principal local government body responsible for raising the quality of local regulations. It is curious that, at this stage, LACORS has serious reservations about the operation of the Bill and, in particular, the clauses that the hon. Lady seeks to amend.
I share the hon. Lady’s concerns about the potential for this power of direction to undermine the authority of an enforcing council which itself—as she said—has a democratic mandate. How can we understand what that might mean in practice? Let me put it rather more simply. I have no doubt that if, for example, Solihull council were to direct Wolverhampton’s local authority, and the elected members of that authority felt that their ability to enforce as they saw fit was being undermined, they would understandably and rightly protest. Indeed, I suspect that they might protest to their Member of Parliament, who sits opposite me as I speak.
In view of that, can the Minister—not least as a member of the Government, but also, obviously, as the elected representative of a large proportion of the city of Wolverhampton—explain to us, and potentially to his constituents, why he feels that his local authority should be so directed by Solihull council or, indeed, by any other local authority? It appears that he does not wish to respond now, but perhaps he will do so at the end of the debate. He is obviously keeping his powder dry until that stage. It is important for us to hear his response, because it will mean the same to all of us as Members of Parliament, who will often be the recipients of complaints and anxieties expressed by constituents.
To an extent our discussion in Committee about the potential for conflict and confusion between local authorities is reflected in the amendments, although they are different from the amendments that we discussed then. A power of direction does, of course, have benefits, notably in improving the consistency and quality of regulation. That is important to businesses of all sizes—small, medium or large. However, given the Government’s record of centralising rather than localising power, it is vital for the Minister to state clearly why he believes that the proposed power is appropriate—whether it is exercised in Wolverhampton or elsewhere—and why he considers that he can justify interference in what are, after all, the powers of a directly elected council.
As I implied in my earlier intervention, I am concerned about the confidence that consumers will have in the system. Clearly good trading standards will rely largely on consumers’ being confident, willing and able to complain, register and seek redress. There is potential for confusion, not least if someone who has complained to a local authority then finds that the action it proposed has been overridden by a different local authority from another part of the country. There is a danger that consumers may be confused and, if they subsequently make complaints or seek redress, they may lack confidence in what they are told because it could be overridden elsewhere. We need to explore through these amendments whether that potential for confusion could undermine public confidence. I hope that the Minister will be able to respond positively.
My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) has raised several points that the Minister may wish to dodge. I congratulate the hon. Member for Solihull (Lorely Burt) on the way in which she moved her amendments, which I certainly support. If the Government do not accept them and the hon. Lady presses them, I shall certainly vote for them.
The impact assessment for the Bill mentions the costs of this measure. It says that the total cost to local government would be £13.6 million, and the total benefits would be £14.2 million, leaving a net annual benefit of £0.6 million. Those figures are based on the Government’s assumptions, and we know how they always hopelessly underestimate the costs and overestimate the benefits. However, the impact assessment also says that there will be a one-off cost of £2 million, so the Bill will cost local authorities £1.4 million in the first year, even if we believe the Government’s figures. I see no additional funding to help local authorities pay for that.
My hon. Friend makes an important point. In Committee—my hon. Friend may not be aware of this as he did not have the opportunity of being a member—it was revealed that Hertfordshire county council had reckoned that the Bill could mean it needed a further 12 officers, which would potentially treble its financial commitment. Does my hon. Friend share my worry that the Bill has greater hidden costs than the regulatory impact assessment suggests?
I was very disappointed not to be on the Committee, having spoken extensively on Second Reading. Obviously, so many colleagues wanted to be on the Committee that I was ruled out, but that is one reason why I hope to speak on Third Reading. We know that the Government’s figures are Mickey Mouse figures, whereas the council’s figures are probably correct. If they are multiplied by the number of local authorities, we see that the Bill will mean huge costs for very little benefit.
I agree with my hon. Friend and the hon. Lady about the confusion that the Bill may cause. I have tried to get my head round the details about prime authorities; what happens when more than one local authority is involved; the significance of whether a company is big or small; and when one local authority’s rules apply as opposed to another’s. I cannot think of anything more confusing, but the Bill is supposed to reduce regulation and improve clarity.
The Minister must surely acknowledge that the Bill will centralise power. The Government will be able to tell the strangely named LBRO what to do and it will then tell the regulators and the local authorities what to do, despite the wishes of elected councillors. When I was a councillor many years ago, the great advantage of local democracy was that we made local decisions for our local area. Decisions we made in Southend were different from those made in Birmingham. It is suggested that if the Government at the centre direct the regulation and remove the right of local authorities to carry out enforcement, that will somehow improve clarity for local businesses. The Minister will have to square the circle and explain that to people.
Councillors in my area have expressed great concern about the Bill. The Minister may, of course, accept the amendments, which would improve the situation.
My hon. Friend will know that in Northamptonshire local authorities are doing their best to slim down the regulatory burden on local residents and businesses. Indeed, his borough council and my borough council already co-operate with regard to legal enforcement. Well-run local authorities are already trying to slim down the regulatory burden and the last thing they want is another Government quango to tell them how to do that.
As hon. Members will know, my hon. Friend is a serving member of Kettering borough council, and he is right to say that his council and Wellingborough council—and Northamptonshire council—have worked hard to improve regulation and make it easier to understand. Indeed, my council is rated as excellent by the Government for its performance.
My area is already facing the problem of massive expansion and now these quangos are being forced on us. But when those quangos make a decision the Government overrule them, as they have done on the strategic gaps. This is another piece of the jigsaw that the Government are trying to impose on local government, with the spin that it will save money for businesses and make matters clearer. In fact, it will cost businesses money. The Government admit that it will cost local authorities money, and it will impose centralised control in every way. It is an appalling measure and should be rejected.
It is important to remind ourselves of one of the central purposes of the Bill, which is to ensure consistency in regulatory enforcement. This goes back to the Hampton report of a few years ago, which identified a significant problem of inconsistency of enforcement around the country. That is where the idea of the primary authority/enforcement authority relationship comes from.
We are not starting from a perfect situation in which inconsistencies do not exist. For example, we heard the case of a manufacturer for a multi-site business which cleared a new product line with its primary authority, under the voluntary system that operates at present, before dispatching the product to the retailer. Despite that, a different local authority believed that the product violated regulations and threatened the store with prosecution. The manufacturer claims that the incident cost them £25,000 in wasted stock. That is what can happen when we do not have clear rules that ensure consistency.
The Minister rightly points out the need for consistency for multi-site businesses, but the consumer argument—raised by several hon. Members today and in Committee—is that the fact that there are two systems, one in which primary authorities operate for multi-site businesses and another in which they do not, has the potential for confusion among consumers, and for those who own single-site smaller businesses. I understand the point about consistency for big business, and I welcome that, but we also need consistency for small businesses and, most importantly, for consumers. Why is that not properly reflected in the Bill?
I am not sure how one would have a primary authority/enforcement authority relationship for a business that was not a multi-site business. That is a problem in logic. The primary authority/enforcement authority relationship applies to multi-site businesses—that is what it is for—so the two issues the hon. Gentleman raises are not directly comparable. Of course, it is not just for big businesses. We talked about a mythical black country car dealership, which might be a medium-sized business, operating across two or three local authority areas that might well benefit from the arrangements set out in the Bill.
On that point, what would happen if McFadden motors—I seem to recall that that was the mythical business that we considered—was a single-site business rather than the huge multinational that the Minister clearly anticipated that it might have been in Committee? My point is about the consumers’ point of view. Understandably, we want to ensure that big business is regulated consistently. The worry is that in creating two systems, there will be potential for consumer confusion. How can the proprietor of McFadden motors ensure that his consumers get consistent advice?
The LBRO will be responsible for giving advice to local authorities. We hope that they will have regard to that when enforcing regulations. Parts of the Bill offer benefits for a consumer who is carrying out a transaction with a business that operates only in the local authority area. Part 2, which we are discussing, is specifically about the primary authority and enforcement authority situation.
Let me turn properly to the amendments moved by the hon. Member for Solihull (Lorely Burt). I echo the comments of the hon. Member for Hertford and Stortford (Mr. Prisk) and commend the hon. Lady on her persistence in pursuing some of the points. However, I am afraid that I shall not be able to accept them on behalf of the Government today. Let me set out why.
The amendments would remove the powers that the Bill creates for the primary authority or the LBRO to give directions that an enforcement action should not go ahead and substitutes for them an advice-giving power. I understand that that is about protecting local authorities’ discretion to pursue enforcement actions should they choose to do so.
Let me say how we want the primary authority scheme to operate. I referred to the importance of consistency, and businesses have asked us to provide access to a scheme that will provide more dependable advice that they can rely on and that will provide a quicker resolution of disputes between authorities, which will give greater certainty and clarity not just for them but for their customers, too. That is why we are looking for the right balance between that and local authorities’ freedom to act.
The Government start from the principle that when a business and a local authority have gone to the trouble of establishing a primary authority for regulation there should be a presumption that the advice given by one professional in one part of the country should be respected by other professionals across the country unless, of course, there are good reasons. There are some safeguards. The amendment, however, would not provide that as it would remove the primary authority’s ability to intervene decisively in how a business was treated.
The hon. Member for Hertford and Stortford referred to the potential for confusion. I believe that the amendments would result in more confusion than the Bill as it stands because they would give far greater freedom for an enforcement authority to ignore the advice of a primary authority than under the relationship that we are trying to construct.
If an enforcement authority believes that the advice given by the primary authority is wrong it can appeal to the LBRO as set out in the Bill and the LBRO could rule on the situation. The amendments, if we accepted them, would put the informal home authority relationships that exist in some cases on to a statutory footing. Under the current schemes, local authorities are informally encouraged to contact the local authority with which the business has a partnership before taking serious action. The difficulty is that under the existing schemes, the consistency that we seek is not delivered. Businesses are finding inconsistent advice around the country. We are not convinced that simply putting that advisory relationship on to a statutory footing would be the best means of tackling that inconsistency.
I am listening very carefully to the points that the Minister is making. Does he agree that the Bill will make sufficient provision so that when the enforcing authority strongly opposes the overall agreement of the primary authority, some sort of partnership arrangements could consider what the enforcing authority has to say and, on occasion, an exemption could be given by the primary authority to the enforcing authority?
It is certainly important that there should be an ongoing dialogue and that enforcing authorities can reflect their experience on the ground to the primary authority. I agree with the hon. Lady about that. She asked about exemptions, and if she will bear with me I shall come to them in a second.
The approach taken in the amendments would remove the primary authority’s right to give a decisive view on whether the enforcing authority should be able to proceed with an enforcement action. For that reason, we are not minded to accept them today. However, exceptions, situations where the enforcing authority does not have time and urgent situations are covered in clause 29, which states that the requirement need not apply
“where the enforcement action is required urgently to avoid a significant risk of serious harm to human health or the environment…or the financial interests of consumers”
or where the application of clause 28, which the hon. Lady is trying to amend, “would be wholly disproportionate”. Built into the Bill is the understanding that there are situations in which an enforcement action will have to take place and the urgency or seriousness of a situation might mean that checking with the primary authority is not possible. If there is a difficulty, the LBRO is there to act as arbitrator and to consider objections by enforcing authorities. That is set out in schedule 4, which the hon. Lady also wants to amend.
This is not about every enforcement action but whether an enforcement action is consistent with the advice issued by the primary authority. I can see that the hon. Member for Hertford and Stortford is eager to rise to his feet again, so I shall give way to him.
The Minister is very generous. It is important that when we legislate, the record is made clear. I understand the exemptions that the Minister cited—
“serious harm to human health or the environment…or the financial interests of consumers”—
but the critical question concerns a situation in which the interests of a local authority mean they want to use strong powers against a miscreant, such as someone in the licensed trade, and that is the clear will of that town, but those actions would go against the national guidance and the decision is overruled because of the primary authority’s decision. Does the Minister understand that there will be a sense in that area that the inhabitants’ democratic wishes will be undermined? I understand the factual arguments, all of which have merit, but the point is that there is a danger that there will be a deficit in the democratic process and people will feel that the system is ignoring their local concerns.
I just want the Minister to acknowledge that this is a centralising measure. Whichever way we look at it, it takes power away from local authorities. Whether that power moves up to the quango or all the way up to Whitehall, it is centralised. The Minister might think that there are benefits to it, but will he please confirm that it is a centralising measure?
It is a consistency measure. That is how I would characterise it.
Costs were another substantive issue raised in the debate, but hon. Members did not mention the fact that the capacity for the recovery of costs from businesses for the primary authority relationship is built into the Bill. We covered that in Committee when we discussed the submission that we received from Hertfordshire county council. Interestingly, despite the fact that it is in the Bill, businesses have still sought it in our discussions with them. They value the consistency that will be brought about by the changes that we are making. It is important to bear that in mind when considering the amendments and how the Bill as a whole will operate.
If the hon. Member for Solihull presses the amendment, the Government will not be able to accept it. I hope that she will withdraw it on the basis of my comments.
I am grateful to all the hon. Members who have spoken for helping to re-air the important matters raised by this group of amendments. I listened carefully to the Minister’s points, and some of his reassurances have gone a long way to making me feel more comfortable about the elements of the Bill that I mentioned. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Fixed monetary penalties: procedure
With this it will be convenient to discuss the following amendments: No. 11, in clause 43, page 20, line 24, at end insert
‘and may require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions,’.
No. 12, in clause 47, page 23, line 24, at end insert
‘and may by notice require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions,’.
The amendments would defend an important principle for business. Amendment No. 10 would give businesses the option of electing for criminal trial rather than having a fixed monetary penalty imposed upon them. Amendment No. 11 would do the same in respect of discretionary requirements and amendment No. 12 would strengthen the existing right of appeal against a stop notice by similar recourse to a court.
I would be worried if companies could use amendment No. 12 as a loophole to delay the imposition of a stop notice, but the wording of clause 54(3) is that a stop notice “may”, and only may, be suspended pending appeal. I assume from that that if a claim were seen as a delaying tactic, the stop notice would not be suspended, in which case the amendment is needed. I would not wish to press an amendment that could be used as a delaying loophole, however, and I seek guidance from the Minister on that point.
I do not envisage that the proposed power would be exercised often. However, it should be in the Bill in case a company feels that it has been wrongly treated and its reputation is at stake. We could make the analogy of an old lady who is accused of stealing a loaf of bread. One could argue that it is a trivial matter and that she should pay the fine or accept the warning and get on with her life, but the size of the offence is not what is important to the old lady. What is important is her reputation. A company’s reputation can be just as important.
The hon. Lady is making an excellent point. It is important to bear in mind that the term “regulated person” in the Bill has a wider connotation than just a business, including someone who is self-employed. It potentially covers a wider group than just the corporate world. I am sure that all Members, particularly those who were unable to be part of the Committee, would wish to know that. Does she agree about that wider resonance, which makes her example very good?
Just before the hon. Lady finishes, I wish to add to the point about the reality of what will happen in business. I have run both a plc and a family business, and I know what will happen if the regulator says to a family business, “You’ve got to pay this amount of money.” Even though the owner of the business knows that they are in the right, they will pay that money rather than go to court. It will therefore be much easier for the regulator to dish out fines. That will be a real hardship for small businesses.
The hon. Gentleman makes a very good point. As well as the question about the relative value of a summary fine to a small and a large business, concern has been raised about whether certain organisations that are reluctant to put their house in order might regard a summary fine as par for the course, just as some might collect parking fines. We must trust the operation of the Bill and trust the enforcement authorities to ensure that any penalties that they issue are proportionate to the size of the business.
Reputation is hugely important, whether for a small local business or a large corporation. It can be translated into direct business, and for that reason I shall seek a Division on amendment No. 10 and, depending on the Minister’s advice, on amendment No. 12.
I begin, again, by commending the hon. Member for Solihull (Lorely Burt) for tabling the amendments. They relate to part 3 of the Bill and the ability of regulators—plural in this case, not a single regulator—to apply civil sanctions, which in plain English means fines for the most part, instead of seeking redress through the criminal justice system. We strongly support the amendments.
We recognise that if they are managed carefully, there is a good argument for civil sanctions when businesses transgress. A fine can sometimes be more appropriate than seeking prosecution for a criminal offence. However, there were serious concerns when the Government originally proposed to allow the revenue from those fines to remain with the regulator concerned. I am pleased to say that the Bill was amended in Committee so that instead of money remaining with the regulator, which could create an undue inducement, it will go to the general Consolidated Fund. The amendments address a different, but related and important, concern that was discussed briefly in Committee.
I turn to the proposals for fixed monetary penalties. I should point out that there are also discretionary penalties in the Bill, but here we are looking at the fixed monetary penalties. The proposals do not allow for an accused person or business—I make that distinction carefully—to defend themselves prior to appeal. Nor do they require a regulator to prove to an independent party that the accused is indeed guilty. In short, the regulator, as the Bill stands, can investigate the issue, prosecute the matter and pass sentence through the civil process, and an accused business can only then appeal to clear its name—to put it in the jargon.
In business, as the hon. Member for Solihull rightly highlighted, reputation is vital. That is especially the case in the modern era—in what we might describe as a more socially and environmentally responsible age. Consumers are very much aware that they can withdraw their custom or sell their shares, and that if a fine has been issued that catches the public eye, it can have an immediate impact on the operation and, indeed, the success or otherwise of that business.
As the Bill stands, a notice to fine can be issued. Of course, in this day and age of 24-hour, instant media, there will then be the public assumption of guilt. We are all familiar with those instances where an announcement is made about a particular situation with a company, and perhaps three months later, after a long and tedious process, it is found that the allegation was not quite accurate or true, or that somebody else was at fault. By then, however, it is not a headline—it is on page 37, in “Corrections”. Nevertheless, the damage has been done. We can all think of different instances. Perhaps an oil company has had an allegation against it about a dangerous leak. Here, I am not thinking merely of oilfields but, in the context of this Bill, the contaminant in the fuel at a petrol filling station possibly leaking into the local water system. We can all think of food hygiene examples. A business whose very trade survives on its reputation as an establishment of high quality could be severely damaged if a fine were submitted and guilt was assumed from that fine.
My hon. Friend is making an extremely important point. Would he like to indicate the scale of the problem? In the supporting documentation, it is estimated that 14,600 of these notices will be issued each year. The small print says that 7,300 are likely to be wrong and withdrawn at the end of the process. That is a pretty hopeless point to start from.
I am very grateful to my hon. Friend, who has rightly highlighted the scale of the problem and the fact that the Government anticipate at this point—before the legislation has become law—that roughly half those fines or sanctions will be mis-proven, so the damage will be considerable. We all know how quickly consumers can make the assumption that something is awry.
It would be unfair of me to rake over the coals of Northern Rock with Ministers for too long, but we can immediately see that in cases where concern is expressed through the national media, people will naturally fear for themselves and act promptly. In these days of 24-hour news and 15-minute news cycles, the potential problem in the first year—some 14,000 fines or sanctions being issued and half being rescinded later—poses a serious danger.
Of course, all that is the reason why businesses of whatever size are concerned. Indeed, I understand that the CBI supports these amendments. It argues in some of its submissions that
“businesses should not face the risk of unsubstantiated damage to their reputation until, and unless, proven guilty”.
For some businesses, the risk of loss of reputation is therefore worse than opting for criminal proceedings, in which accusations must be proven and the standard of evidence is significantly higher. Clearly, many businesses will prefer to stick with the civil process, but the point of the amendments, as the hon. Lady said earlier, is to allow a minority who might prefer to use the criminal justice system to opt for that. They might choose to do so because they wish, quite naturally, to have the accusation proven against them rather than assumed, or because they believe that the higher standard of evidence is important. I therefore believe that these amendments would strengthen, rather than weaken, the principles behind the Bill.
It is not only the CBI that has expressed a wish to see these amendments tabled. The British Retail Consortium, for example, has throughout the Bill’s passage expressed serious worries about the whole of part 3 and particularly about the sanctions, which it believes are “unacceptable” as they stand. Turning to the smallest of businesses, the Forum of Private Business, for example, has said in submissions to this House that as drafted, these sanctions are “a deal-breaker.”
Given all that and the information provided by the hon. Member for Solihull, these are important improvements to the Bill. Given, too, that these civil sanctions are being introduced so that regulators have a choice, should not the regulated also have a choice as to which system is appropriate?
It is a great pleasure to follow my hon. Friend the Member for Hertford and Stortford (Mr. Prisk), who made a number of powerful points that I would have made. I want to look at a practical instance but before doing so, I should perhaps declare that I am a member of the Institute of Chartered Accountants and a director of a small company; I refer the House to my entry in the Register of Members’ Interests.
In reality, if someone has a problem with a regulator, in most cases they will try to sort it out and reach a conclusion. Sometimes, the regulator is being stubborn and stupid and does not understand the business. Some of these comments refer to the Government. I do not know how they can come up with these measures—it seems that they do not understand business, particularly small businesses, at all. What would happen next if there were such a problem? The regulator would come and see me, for example, and if we could not sort it out, we would eventually go to court. Things would be unlikely to go that far, because I would work very hard to avoid that, as would the regulator.
However, what will happen if the Bill goes through unamended? At the moment, regulators have four types of enforcement procedures: warning letters, statutory notices, formal cautions and prosecutions. They will be extended to include fixed monetary penalties, variable monetary penalties, enforcement undertakings, discretionary notices and stop notices. In other words, we are extending enormously the powers of regulators to interfere with businesses.
A regulator will be able to come along and say, “Mr. Bone, you are not doing this right, and we are going to fine you.” As a small business, I would say, “Actually, I am doing it right”. However, I would not be able to afford the time, let alone the cost involved, to appeal, get involved or argue against the regulator, so I would simply pay up. That is what will happen. Throughout the country, hundreds if not thousands of busybodies will interfere with businesses that are running properly and successfully, because they know that they can impose a fine rather than proceeding to a prosecution, which they would not dare to do because they know that they would lose.
My hon. Friend is absolutely right. It is perhaps worth drawing the House’s attention to schedule 5, which lists the regulators involved. He might be as shocked as I was when I first discovered this to learn that a minimum of 26 different regulators are involved, and more than 140 different pieces of legislation. Does he share my concern that this, while understandable in a minor context, is an enormous change in the balance of how these sanctions will work?
My hon. Friend makes an extremely important point, and it is clear that that is exactly what will happen.
These regulators are saying that the Government want us to hire more people to go out into businesses and intervene, saying, “You’re not doing that quite right—here is a fine; here is a sanction.” That will do enormous damage to small businesses. The signal that the Government are sending out is that they do not care about small business. The Bill is great for big businesses, which can look after themselves. Things will be clearer for them, but small businesses are the engine and driving force of our economy and they will be terribly disappointed. They will not do anything about it, of course: I am afraid that the truth is that they will pay up and just say, “Here we go again. This Labour Government are interfering and imposing more penalties on us.”
I am sure that the problem that I am describing is an unintended consequence, but the least that the Minister could do now is to recognise that the hon. Member for Solihull (Lorely Burt) is making a fair and reasonable argument, and accept the amendments. If he does not do so, I urge her to press them to a Division.
The previous group of amendments touched on the question of consistency, which is one of the Bill’s major concerns. I do not know whether the hon. Member for Solihull (Lorely Burt) intended it, but the current group of amendments touches on the Bill’s other main concern—inflexibility in the current system.
In my remarks on the first group of amendments, I referred to the Hampton report. I shall now refer to the Macrory report, which was about the inflexibility of a one-club-fits-all approach to regulatory enforcement and proposed that regulators should have a greater variety of enforcement options. That proposal has been supported by many business voices, including the British Chambers of Commerce. That organisation represents the views of many small businesses in this country, and it said that variable monetary penalties should be available to regulators as part of a mixed system, as a variable line would allow the regulator to operate flexibly and proportionately. In addition, the Institute of Directors welcomed the proposition that a wider range of penalties would mean less use of criminal sanctions and less time and money spent on court procedures. The Bill’s regulatory impact assessment estimates that the savings to be made from fewer court appearances could amount to £88 million.
That may be the hon. Gentleman’s opinion, but the purpose of the Bill is to prevent, by means of a more proportionate and variable system of regulatory enforcement, the very businesses that he is worried about from being dragged through the courts continually.
No one objects to having a wider range of sanctions or wants companies to be dragged through the courts unwillingly. However, the point is that, on the rare occasion when a company elects to go for court action, it should have the right to be able to defend its reputation in that way.
The amendments focus on that precise point. I said in Committee that the new sanctions are an alternative to criminal prosecution. Before determining whether to pursue a prosecution or impose a sanction, the regulator will have to undertake a thorough and rigorous investigation, at the end of which a determination of whether a person has committed an offence will be made. The regulator would then decide the most appropriate course of action.
We understand that the regulator will have that choice, and rightly so. The point is that the accused—the regulated—should also be able to make a choice. No one disputes that there needs to be a range of tools in the regulator’s tool box, but we believe that the person being regulated should have similar options. As it stands, the Bill does not make that available to them. Why not?
The hon. Gentleman has made that point several times. If he will allow me to make a little progress, I shall deal with the question of who should choose which road we go down in this sort of situation.
The Macrory report found that criminal prosecution should be reserved for those cases that really merit it. We believe that the choice between civil and criminal sanctions should remain at the discretion of the regulator. The Bill contains a number of important safeguards in that respect. Before a regulator can impose a fixed monetary penalty of the kind discussed by the hon. Member for Wellingborough (Mr. Bone), or a discretionary requirement, it will have to be satisfied beyond reasonable doubt that a criminal offence has been committed. The regulator must then serve a notice of intent and allow the business to make representations and organise a defence.
The hon. Member for Hertford and Stortford (Mr. Prisk) noted that, as was discussed at length in Committee, the proposed sanctions can be appealed to an impartial, independent and expert tribunal. That gives business an important safeguard against a regulator who applies a penalty incorrectly.
The hon. Member for Solihull raised the issue of a business’s reputation. It is part of the core of her argument, and I understand that we do not want businesses to suffer reputational damage unnecessarily. I agree with the hon. Member for Hertford and Stortford that that is increasingly important in the business world, and for very good reason. However, I draw the attention of the hon. Member for Solihull to clause 65, which requires the regulators
“to publish the cases in which the civil sanction has been imposed”.
Clause 65(3) specifically exempts from that requirement those cases that have been overturned on appeal. That means that, when a tribunal finds in a business’s favour, a mechanism will be in place to ensure that that business’s reputation does not suffer harm.
The Minister is courteous, but has still not answered the point. All of what he has described is fine, but it comes after the event—that is, after an allegation has been made, the fine issued and the sanction imposed. The regulated business still does not have the option to have its day in court. That is the point at issue: we are well aware that there will be opportunities to seek redress after the event, but that may be too late for some businesses. Why is a provision giving regulated businesses the option to go to court not included in the Bill?
The hon. Gentleman has asked about that issue several times. As I say, the variable penalties are an alternative to criminal prosecution. A business faced with a penalty might spin out the process to see what happened, and then appeal at the end of the process for a different type of judgment altogether. There is a power of appeal to an independent tribunal, which safeguards the rights of the business; that is very important. However, under the Bill, it is the regulator who should make the judgment about which road to go down.
I will in a moment. I want to come on to the point that the hon. Member for Solihull made about stop notices. The amendment could have serious consequences resulting from the withdrawal of a stop notice served by a regulator. Such notices would be imposed only in strictly controlled circumstances, where there is a significant risk of serious harm to human health, the environment, the financial interest of consumers and so on. If there had been serious environmental damage, it would not be appropriate for a business to be able to opt for a prosecution instead, as the serious harm specified in the stop notice could then continue or even grow. That illustrates why the choice for which the hon. Member for Hertford and Stortford is arguing could be damaging to the public interest and consumer interest.
I did not serve on the Committee and I have not followed these matters as closely as Opposition Front Benchers, but I have a general interest in the subject. Surely it is not terribly unusual, counter-intuitive or unreasonable for the regulator to lead and guide the process of deciding what the route the sanction procedure will take, given that the issues concerned must be controversial, or things would not have reached that point.
My hon. Friend is absolutely right. The issue arose in Committee, where my hon. Friend the Member for Glasgow, North (Ann McKechin), said that
“prosecutions should be taken if they are in the public interest”––[Official Report, Regulatory Enforcement and Sanctions Public Bill Committee, 17 June 2008; c. 71.]
Allowing a person to choose whether or not they are prosecuted would go against that understanding.
The Minister has been exceptionally gracious, and has entered into the debate, but we now see the division between the two sides of the House. The Government’s view is that the regulator is the important organisation, and has the right to impose from the centre a decision to apply a sanction or hold a trial. There is no reference to the reputation of the business. If the case goes to court, and the business has an independent hearing before the judiciary, the business is clearly stating, for everyone to see, that it does not believe that what the regulator says is right. In 50 per cent. of cases—or more, if one believes what one reads in Government documents—it will win. This is just a matter of justice. A by-election is being fought this week on the issue of justice. Is not the provision yet another example of draconian centralisation by the Government?
The hon. Gentleman tempts me to go into the reasons for the by-election, but I will resist the temptation. My hon. Friend the Member for Birmingham, Erdington (Mr. Simon) is correct: it is not appropriate for a regulator to make the judgment. There is a power of appeal to an independent tribunal. That is an important safeguard for the reputation of a business that is wrongly accused. On that note—
I have listened carefully to the points that the Minister made. Regrettably, I feel just as strongly—probably more strongly—about the issue of justice that is involved as I did when we started the debate, so with the greatest of respect, I will not withdraw the amendment.
Question put, That the amendment be made:—
Order for Third Reading read.
I beg to move, That the Bill be now read the Third time.
As I noted throughout our discussions on Second Reading and in Committee, the Bill seeks to equip regulators with the right tools and duties to address the many different circumstances in which they are expected to enforce regulation in practice.
In our debate this afternoon on the amendments, we debated two major issues that the Bill is intended to address: inconsistency and inflexibility in the regulatory system. The five principles of good regulation feature prominently in the Bill: consistency, transparency, targeting, proportionality and regulators’ accountability.
The background to the Bill is that in 2005 Philip Hampton reported to the Government on the burdens that arise from the enforcement of regulations. His report made it clear that better regulation is a matter not purely of policy making and legislation or of making policy better in the first instance, but of ensuring the right framework for the enforcement and upholding of regulations. This requires a system that provides effective enforcement by front-line professionals and the flexible use of sanctions to deal with non-compliance in ways appropriate to each case. Introducing the Bill on Second Reading in the other place, my colleague Lord Jones of Birmingham paid tribute to the expertise that stakeholders had brought to the Bill’s development, and I echo his comments. Local authorities and their representatives, the national regulators and business all contributed to its development.
The Hampton report set out a vision of a regulatory enforcement system in which honest businesses, doing their best to comply with the law, and regulators, seeking to protect the public as effectively as possible, move from a traditional adversarial relationship and work together to secure compliance with regulations intended to protect all our interests.
I believe that the Bill has, for the most part, been developed in the same spirit, and we are grateful for the input of business regulators, local authorities and all who helped to guide the process. I thank the hon. Members for Hertford and Stortford (Mr. Prisk), and for Solihull (Lorely Burt) and other hon. Members for their contributions, courtesy and understanding in Committee. The hon. Member for Hertford and Stortford probed and pressed, with some skill and some courtesy, for which I am grateful.
The debate addressed a number of important issues and offered us the chance to consider the safeguards that are rightly attached to many of the Bill’s powers. Its tone reflected the fact that before arriving here the Bill benefited from close and detailed scrutiny in the other place, where a number of amendments were made. Those included additional protections on how the local better regulation office would work in practice with local authorities, additional safeguards on the use of the alternative regulatory sanctions set out in part 3 and some refinements of part 4 in respect of how regulators would work, ensuring that there should be no unintended consequences.
I am grateful for all the work put in by Members on both sides of the House. The Bill is intended to improve how regulation works in our economy, in the interests of the regulated and, most of all, of the public. It is in all our interests for us to have a system in which business can thrive and grow and for the public to be confident that the regulations that the House considers and passes are enforced properly and proportionately in practice. That is what the Bill is intended to ensure, and I commend it to the House.
I am grateful to the Minister for his opening remarks, which I should like to reciprocate by thanking him for the courteous and patient way in which he approached our discussions in Committee.
It is in vogue in the Government to compare oneself with a fictitious literary character; on that note, I suggest that the Minister has performed with the patience and courtesy of Mr. Bennet from “Pride and Prejudice” to his rather awkward and occasionally annoying offspring. I shall save the Minister the blushes that would be involved in suggesting which particular member of his family he might wish to compare me to.
I should also like to thank my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) and my hon. Friends the Members for St. Albans (Anne Main) and for Mid-Bedfordshire (Mrs. Dorries), who were of great support to me in Committee. I particularly thank my hon. Friend the Member for Billericay (Mr. Baron) for his patient guidance and help.
As the Minister said, this Bill is not the Government’s first attempt to tackle regulation. In both 2001 and 2005, attempts were made to turn the regulatory tide. Sadly, neither made any real impression on the volume or complexity of the law, and meanwhile the burden on business has grown. It is important to remember that context when we consider the aims and outcomes of the Bill and the deliberations that we have had to date. I shall not attempt to rehearse the arguments debated on Second Reading—nor would you allow me to, Mr. Deputy Speaker, and rightly so. Let me just say that we Conservatives endorse the principles of risk-based regulation, but we believe that this measure is too narrow and, all too often, far too complex. As our economy faces a serious downturn, we need to be bolder in freeing enterprise from needless red tape.
Deliberation on the Bill began, of course, in the other place, and right from the start it was clear that there were serious deficiencies. For example, a new super-local-regulator was to be established, but there was to have been little effective oversight. I am pleased to say that my noble Friends tabled substantial amendments that would improve the scrutiny and operation of the local better regulation office. The insertion of provisions for a formal three-year review in clause 17, and for consultation in clauses 9 and 10, are all the direct result of that scrutiny.
Equally, the original Bill permitted regulators the ability not only to issue civil fines—we debated that on Report—but to keep the money from those fines. There was a danger that that new source of revenue could encourage regulators to become the worst sort of target-led traffic wardens—fine first, and ask questions later. As the Minister said when we debated the matter in Committee, the danger of that would have been its undermining of the risk-based approach to regulation that lies at the heart of the legislation’s original aims. Thankfully, that danger has been averted; instead, the moneys will be deposited into the general consolidated fund, thus removing any incentive for regulators to use fines inappropriately. I have no doubt that that sensible compromise will be even more welcome in a rather cash-strapped Treasury.
Looking back, I estimate that there have been at least a dozen important amendments to the Bill during its passage through Parliament. I hope that the Government Whips will note that all this took place without the need for heavy-handed so-called programme motions. Scrutiny is often more effective when not held on a short leash.
However, the Bill is far from perfect. I remain sceptical about the capability of the LBRO to change single-handedly the performance of the worst local regulators. Change management, as the Minister will know, is about the leadership and culture of an organisation, but the Bill fails to address either. The precedent in clause 7—the power for an unaccountable body to turn guidelines into directions—is one that we thoroughly debated at various stages of the Bill’s passage. Conservative Members remain concerned, and we would expect the whole matter to be included explicitly in the three-year review that the Government conceded earlier. There are real dangers surrounding this precedent. It is the first time, as far as I am aware, that an unaccountable body that is not directly accountable to this House has the ability to turn its guidelines into directions. Despite the Minister’s assurances, I suspect that it will not be long before we find before the House similar measures and requests from other quangos for pretty similar powers.
Part 2 establishes primary authorities for multi-site businesses. That could be good news for larger firms such as Tesco, but it has the potential, as my hon. Friend the Member for Wellingborough (Mr. Bone) said in his comments on Report, to leave small single-site firms behind. In Committee, the Minister gave me clear assurances that small businesses will not be disadvantaged. I intend to hold him to his word, and to that end I will contact small business organisations to ask them to help me to monitor this whole process among their members. I am sure that the Minister will agree that it is vital that small businesses trade on a fair and level playing field.
Equally, I remain concerned about the potential for confusion among consumers about how complaints and enforcement action will be handled. Indeed, we heard strong evidence in Committee about the potential for bureaucracy, not least from Hertfordshire county council, which fears that it could need another 12 officers. That is just one local authority of nearly 500, so hon. Members will realise the potential cost to council tax payers, or, if the money is recouped by business, as the Minister suggested earlier, the unwelcome costs to businesses that they may not have anticipated in full.
Then there is the power to charge businesses. During our discussions on the first day in Committee, I asked the Minister who would determine those charges and who would judge whether they were reasonable. I am pleased to say that yesterday I received the Minister’s reply by letter, which I think has been copied to all members of the Committee.
The Minister confirms that. In his letter, he says that each primary authority would set the charges and the LBRO would provide oversight. I welcome that clarification, although I can see the potential for delay before such directions may be forthcoming.
In Committee, the Minister also promised to answer my questions about the budgets for first tier tribunals handling the appeals, especially in their first year. Again, he did not have the answer, which came in his letter yesterday; I think that hon. Members who have not had the chance to see it will be interested. He said that each regulatory regime, or first tier tribunal, involved would expect a cost in the region of £100,000. Could he confirm, now or again through correspondence, how many different regulatory regimes the Government anticipate, and therefore the total cost? There will be several different regulatory regimes, but his letter does not tell us how many, so it is unclear whether we are talking about 26—I doubt that, but it would mean costs of £2.6 million—or only two or three.
Part 3 was highly controversial when first published because, as we said earlier, it extends the power to fine people to not only one regulator but more than 26. I say that because 26 are named, and then it refers to “local fisheries committees”. It is unclear whether that means there are 432 or 29. Not only are a notable number of regulators involved, but the fines and sanctions that will be applied will involve 140 other pieces of legislation, each of which are listed in the Bill. The powers granted will allow those regulators to be the investigator, the judge and the jury.
Thankfully, the Bill has been significantly amended. There will be, as the Minister has highlighted, an independent appeals process, but as we discussed, that process will occur only after the event. There will be no independent hearing, therefore, in which an accusation will be tested, and in which the guilt will have to be proven before the event. The Minister has given the House quite extensive assurances, both in the debates on amendments Nos. 10 and 12 on Report, and in Committee, that the system will be fair and open. I take him at his word. I simply say to him that we will hold him and any of his successors to that, so that the Government ensure that those promises are fulfilled.
We want to monitor closely how the process evolves. As we learned from the excellent identification by my hon. Friend the Member for Wellingborough, some 14,000 sanctions could be involved, half of which the Government expect could be rescinded. This is not a minor matter, but an important one. I recognise the benefits of a streamlined, civil system of sanctions, but we must not lose sight of fairness. I suspect that many small businesses will just pay up, because they do not have either the time or resources to fight. The danger is that we will then see a real sense of injustice, which can undermine the system and the economy.
The origin of the Bill was, rightly, in seeking to improve the quality and consistency of regulation and its implementation. Those are good principles, but what is at stake is whether the Bill will achieve them. The process in this House and the other place has improved the Bill, but it remains far from perfect. That is why we have sought to set out our reservations carefully, cautiously and perhaps at greater length than some on the Government Benches may have liked. Equally, no one should forget that this Bill is the third attempt by the Government to tackle regulation. Both of their two previous attempts have failed. After 11 years in office, and more than 35,000 new regulations, Ministers must understand that neither business nor consumers will tolerate a third failure.
I shall be brief; we have had extensive discussion this afternoon. I extend my thanks to everyone who worked so constructively in Committee, and to the various bodies that have been so kind as to give me advice. I particularly single out Local Authorities Co-ordinators of Regulatory Services and the CBI.
Although this is not the most nerve-tinglingly exciting Bill that I have ever worked on, it is hugely important for business in its constant struggle to meet the demands of regulation and to make money, especially in these difficult financial times when business needs to concentrate on defending existing business share on top of growing new business. For everyone’s sake, I hope that the establishment of local better regulation offices will not only smooth the passage of regulatory compliance for business, but will be carried out in a spirit of helpfulness, with the sharing of best practice, to make business better placed to meet regulatory requirements and to become more efficient and better able to tackle the challenges of today’s tough business world.
I hope that the formulation of the primary authority will help resolve business frustration about any local enforcement inconsistencies that might be experienced in operating from more than one local authority area.
I am slightly worried about that point and the Tesco argument. If Tesco finds a primary authority that whizzes through all it wants, it could impose all that in Wellingborough against my local authority’s wishes. The Government seem to be in league with huge businesses.
I am grateful for the hon. Gentleman’s intervention and I share his concerns. The Bill contains sanctions, which are available to the local better regulation office and the company that is being regulated. We must trust that they will be effective. The Tesco example, to which the hon. Gentleman alluded, is the position whereby an organisation, which is being regulated from elsewhere, does not comply with not only the organisation’s overall requirements but local requirements. That is why I felt that it was important to ensure that the local enforcing authority can react strongly and quickly when such circumstances arise.
The primary authority must be mindful of and sensitive to the fact that local authorities serve local people, and I hope that any conflicts that arise between the primary authority and the enforcing authority can be resolved sensitively. After all, customers are customers, wherever they reside.
The faster, more automatic system and the wider range of penalties that we have discussed today should make for speedier resolution of breaches of regulation. However, it is to be hoped that that does not give the green light to less scrupulous companies to disregard a regulation’s intention and delay putting their house in order by simply paying up specific statutory fines again and again. I am sure that the local enforcement authority and the lead authority will work together to ensure that that does not happen. We must safeguard those companies, which the hon. Member for Hertford and Stortford (Mr. Prisk) mentioned, that seek to comply with regulations and work within the rules honestly. They ask only for a level playing field, which regulation at its best can offer.
Reputation is a factor to which I wish the Government had seen fit to pay more regard. The option to elect for criminal proceedings would have given comfort—not as something that a company would envisage needing to do, but as a fall-back if it felt strongly that an injustice had been done.
The Minister makes an interesting point, but I gave an example earlier of an old lady whose name is cleared and who is vindicated. I believe that companies should have that right, not after they receive the fine or other penalty, but before that damage is done. Once a fine is imposed, reputation is lost, even if the decision is overturned on appeal.
As I said, regulation can help business as well as the consumer by creating a level playing field. However, I am sure that everyone involved—businesses, consumers and the Government—would wish to see less regulation. The Government have committed to reducing the regulatory burden on business by 25 per cent. by 2010. We are now halfway through the time allocated, yet even having picked the low-hanging fruit, the Government have managed only 6 per cent. so far. It is to be hoped that the local better regulation offices will work extra hard in conjunction with the primary and the local enforcement authorities to help to mitigate the effects of the huge burden of regulation on British business today.
Order. Before I call the last speaker, I have to report an error in the numbers reported as having voted yesterday in deferred Division No. 258, on the draft Northern Ireland (Sentences) Act 1998 (Specified Organisations) Order 2008. The numbers voting Aye were 298, rather than 285. The number for the Noes was not affected and remains at 118. The Clerk will arrange for the record to be corrected.
It is a great pleasure to follow the hon. Member for Solihull (Lorely Burt), who throughout today’s debate set out reasoned arguments that I was very surprised the Government did not accept. I am also delighted to follow my hon. Friend the Member for Hertford and Stortford (Mr. Prisk), who has led so well for Her Majesty’s Opposition. I notice that he entered the realm of fictitious characters, but I think he chose the wrong one for the Minister. A much more appropriate character would be Jim Hacker, whom I will mention later. I must declare my interest in the Register of Members’ Interests and the fact that I am a director of a small family company and a fellow of the Institute of Chartered Accountants in England and Wales.
The Bill is not a minor measure; it is a major shift to centralisation by the Government. As my hon. Friend mentioned, 27 regulators are affected by the Bill, excluding local authorities which are all affected. It would be helpful to read out the list of regulators. They are the British Hallmarking Council, the Charity Commission for England and Wales—one can imagine the potential impact on local authorities—the Coal Authority, the Competition Commission, the Countryside Council for Wales, the Environment Agency, the Financial Services Authority and the Food Standards Agency, which raises another issue. If one of the regulators has a prime authority in one particular area, that could be very damaging.
The list continues: the Football Licensing Authority, the Forestry Commissioners, the Gambling Commission, the Gangmasters Licensing Authority and the Health and Safety Executive, which is an extraordinary regulator to be included in the list. I say that because the Government, through the local business regulatory office, will be controlling what the regulator does, as we will see later. That will be extremely damaging to the Health and Safety Executive, whose independence I would have thought ought to be most important.
The list continues: the Hearing Aid Council, the Historic Buildings and Monuments Commission for England, or English Heritage for short, the Housing Corporation, the Human Fertilisation and Embryology Authority, the Human Tissue Authority, the Information Commissioner, local fisheries committees, Natural England, the Office of Communications, the Office of Fair Trading, the Office of Rail Regulation, the Pensions Regulator, the Security Industry Authority and the Statistics Board.
That is an extraordinary list, but why pick those and not other regulators? The Government did not comment on that at all in the debate on Second Reading, to which I both listened and contributed. Unfortunately, I was not allowed to be a member of the Public Bill Committee, which I regret, as there was competition to serve on it. Third Reading is therefore my only opportunity to comment on the Bill as a Back Bencher.
As someone who was allowed to serve on the Committee, given my special knowledge of this area, may I ask the hon. Gentleman whether he was a little surprised by his party’s decision not to force Divisions on Second Reading or—I do not know; perhaps he will comment on this—Third Reading?
That is a very useful and helpful comment, because it brings me to something I was going to say later in my speech. Unfortunately, there has been a lack of intervention by Labour Back Benchers to show support for the Minister. In fact, I think that the number was zero on Second Reading and zero on Report, but never mind.
I have many concerns about the Bill, and I hope to outline them in the next hour or two. I also hope that the House will divide at the end of the debate, because this is a serious matter. Amendments have been tabled but they were not accepted, so a Division would be most welcome and I shall certainly vote against the measure. There is no opportunity for the Minister to say anything at the end of the debate, so I will vote against the measure if a Division is called.
Let us get back to the Bill. It aims to reduce the regulatory burden on business by setting up a super-regulator. I should like to refer to the very helpful impact assessment produced by the Department for Business, Enterprise and Regulatory Reform in May 2008. I believe it is the second version—obviously, the Government got it wrong the first time—and it is signed by a Minister. Unfortunately, the signature is a squiggle and we are not told who the Minister is. I wonder whether it is the Minister for Employment Relations and Postal Affairs—
Aha! We are talking about the regulation of business, and one of the annoying things that happens is that businesses receive documents from the Government, from regulators and from local authorities, sometimes undated, always without the name of the sender, and signed with a squiggle. And that is exactly what we have got from the Government today, on the very provision that they are using to try to reduce regulation. I guess that this is because the Minister does not really want to be associated with a Bill that is actually indefensible.
The Bill will set up what the Government call—let me get this right—the local better regulation office. My goodness me! Could they not have thought of a better title than that? Perhaps something like the department of administrative affairs, or, more accurately, the “Yes Minister” department would have been a much better title and people would have understood what we were trying to do in the House today. The Government are trying to reduce regulation, red tape and costs to business by setting up a super-regulatory department. We are going to create regulators and bureaucrats to regulate and administer other bureaucrats. This is straight out of “Yes Minister”.
The Government might say, “Oh, this is only a small thing. Don’t worry about it.” However, the new office will have a staff of 25 and a budget of £4.5 million. That is fewer than one regulator for every regulator that the Government want to regulate; and £4.5 million a year for a staff of 25 works out at £180,000 per person. That sounds like a pretty good salary for those involved. Unfortunately, the Minister was unable to tell us what the chief executive of this new organisation was to be paid.
I am absolutely assured of one thing: if this new department goes ahead—if this “Yes Ministry” is established—the first thing it will look at will not be better regulation but expanding its empire, taking on more people and costing more money. That is what Government Departments do.
My hon. Friend is absolutely right. The point was made earlier that, according to the Government’s own estimate, the cost to local government would not be recovered for at least four or five years, even if this measure is brought in. Every time we set up a regulator, he or she has to produce a piece of paper and someone at the other end of the system has to receive that piece of paper. My hon. Friend is right to say that, rather than reducing the regulatory burden, the Bill will increase it.
As usual, my hon. Friend is absolutely right. I do not think the Government could possibly deny that their estimate of the costs and numbers will be wrong. I would like to know of any Government estimate of costs and numbers that has ever been right when they are setting up a new department.
The hon. Member for Solihull referred to this new department earlier as a super-quango. The Government control it, it is funded by the taxpayer, and it will impose its views on 27 regulators and local authorities and tell them how to regulate what they are regulating. The first thing that shows this to be total nonsense is the fact that local authorities know how to regulate in their areas. Their locally elected councillors will be thrown out by their electorate if they do not do their job properly, but there are no such safeguards for this centralised quango or this “Yes Ministry”. We cannot get rid of them in the same way as we can get rid of local councillors. What will happen is that decisions will be forced on a local government area by a prime authority, which will not be the local authority area affected, and the councillors will get the blame for it. They will be thrown out, but it will really be the Government’s fault.
The Bill significantly increases Whitehall’s control of regulation and local government. That is the Bill’s intention. The Minister was, in Jim Hacker style, not quite courageous enough to admit that it amounts to centralisation, but he used a rather similar word. In fact, nobody could really argue that the Bill was not about centralisation. It is a striking example of the Prime Minister’s obsessive macro and micro-management of the country. He wants to be able to go into every nook and cranny.
What my local authority in Wellingborough wants to enforce may be different from what an authority in Brecon and Radnorshire or Glasgow wants to do. I rejoice in that. I rejoice in the localism of my local authority knowing how to regulate locally. I do not want everything to be standard. I do not want Tesco to build everywhere because they have found some primary authority that will allow it to do that.
What worries me most about this super-regulation and this new department of administrative affairs is the cost. I have with me a document that was not freely available with the explanatory notes, but was very helpfully provided by my research assistant, Mr. Richard Britton. This impact assessment lists all the costs and alleged savings. It has a Minister’s signature on it, so we must assume that it has gone through the Government and been approved. There are many figures about savings. It states:
“The evidence regarding the cost of administering existing partnerships is not consistent; much relates to experiences with the small number of firms with the largest national presence.”
I am not sure exactly what that is supposed to mean. A large firm will have a large national presence, but a small firm will not by virtue of the fact that it is a small firm.
What of the costs relating to local authorities, which are perhaps the most affected by the changes? They will lose control; their decision making will be removed. If we follow the chain back through the prime authority and through the regulator, we get back to Whitehall overruling local government affairs. Somehow or other, this was supposed to save money. On page 21, the impact assessment states that the total local authority costs are £13.6 million, while the benefits are said to be £14.2 million, with a net annual benefit of £0.5 million. I do not think that the arithmetic quite works there, but that is what it says. It then adds in very small print that there is a one-off cost of £1.9 million, so this is not revenue-neutral to local government. Even if we believe the Alice in Wonderland figures produced by the Government, this is going to cost local government money. Time and again, councillors tell me that the Government take away their powers and force them to do things without funding them for doing so. That is exactly what we have before us today.
The Government have helpfully given us a figure for the overall cost. I am not sure how they arrived at it, but it is an extraordinary amount: £42 million. That sounds an awfully large cost to me, with a risk of little or no return. Most of the benefits are artificial. The Government talk of savings in lawyers’ fees for businesses, but that is merely an aspiration, while the costs are plain to see.
Let us consider the National Audit Office. For every £1 that the NAO spends, it saves £8. If we are to believe the Mickey Mouse figures in the impact assessment, the return on the Bill might be just over what is spent. If the Government were really keen on reducing regulation and cutting costs, they could get rid of certain elements. They could get rid of regional government at a stroke, saving £230 million a year for businesses. Local authorities would welcome that as well, because the costs of consulting regional government would also go. If the Government really want to help local authorities out, why not abolish the Standards Board for England? That could be done overnight. No one would miss the board, and its abolition would save £12 million. That is a great deal more than the half a million a year that the Government reckon they will save each year, if the one-off cost is ignored.
This is a centralising measure that could only please someone like Jim Hacker. We are creating a huge department, which will expand. The Government say that the cost in the first year will be £73 million. If we add a quarter to cover their miscalculation, the figure becomes £100 million. The office will start out with 25 staff. That figure sounds as if it was plucked out of the sky. We will see an ever-growing super-quango which will impose more and more regulations on regulators, and the regulators will impose more and more fines on businesses. The Government have doubled the number of sanctions that regulators can use against businesses, which will not improve anything for business or for regulators.
There is a wonderful and damning statement in the impact assessment. Paragraph 152 on page 50 states:
“Since the publication in 2005 of the Hampton Review, which looked at the scope for reducing the administrative burdens caused by regulators’ inspection and enforcement activities, the Government has been introducing new tools to deliver the better regulation agenda.”
In practice, that is absolute rubbish. I know from my experience of running companies that what they want the Government to do is butt out and not to be involved. Businessmen say, “Leave us to do our own thing. We know how to run businesses; we know how to employ people; we know how to invest profits. What we don’t want is an enormous number of forms and teams of regulators coming in to check what we’re doing.”
This super-regulatory office will increase the number of staff. If there are 27 regulators and each takes on another 100 people to go around investigating and imposing the sanctions that the Government tell them they must now impose rather than going to court, that represents a huge amount of lost income for business. The Minister may not see where the loss of income arises, but I know from experience that before a VAT inspection, one spend hours and hours getting everything right. If the VAT inspector turns up—I remember an occasion when he did not bother to do so because it was raining heavily, and we had done all the work for him—he goes through all the paperwork and if he then says, “You’ve done something wrong”, it can be sorted out with him.
Occasionally, there is an argument of substance. In one instance, a company—I was not involved; it was a different company—felt very strongly that it was not prepared to accept the regulator’s guidance and took the case to court. It won the case and there was no damage done to its reputation. Under this procedure, companies will be fined, their reputation will be damaged and it will be reported on the front page of the Evening Telegraph, or the equivalent local paper. The Government admit in this document that half the fixed penalty notices will be lost, which suggests that they think the regulators will hand them out willy-nilly. The damage done to business, in the loss of time when the regulators visit and in the actual costs imposed, will be extraordinary.
I wish to draw the House’s attention to the stunning example in the impact assessment, to which the Minister did not refer. I know it is not the done thing to show a graph in the House, but I shall try to describe this wonderful graph. It has a red line and a green line. The red line is supposed to be the savings and the green line is the cost. These are the Government’s own figures, and one can clearly see that for more than two years the green line is above the—
Order. The hon. Gentleman should take his own advice. It is very difficult for the Official Report otherwise.
It was just such a clear example showing that, despite all the assurances we have heard from the Minister, this measure will, between now and the next general election, cost local authorities and businesses money. That is not what I say: it is here in the report.
At the next election, my right hon. Friend the Member for Witney (Mr. Cameron) will become Prime Minister and we will have to reform all these regulations. It is “Yes Minister” at its worst. The Government are drawing power to the centre and producing more and more bureaucrats. In an economic crisis, when the economy is crying out for leadership, what is the Government’s big idea? It is to create a department for administrative affairs with more administrators administering other administrators, and it will cost £73 million. The Minister is the new Jim Hacker, and if the House divides on Third Reading, I shall oppose this Bill.
Question put and agreed to.
Bill accordingly read the Third time, and passed, with amendments.