I make the usual reminder that if there is a Division in the Chamber, the Committee will adjourn immediately and will resume again after 10 minutes.
Clause 34 [Power to make orders providing for civil sanctions]:
moved Amendment No. 104:
104: Clause 34, page 14, line 16, leave out paragraph (b)
The noble and learned Lord said: The amendment would leave out Clause 34(1)(b), which relates to the power over discretionary requirements and variable penalties. I speak also to Clause 34 stand part; Amendment No. 109 to leave out Clause 35(3), which removes the system away from the ordinary prosecuting process of the CPS, the police, the Procurator Fiscal and Northern Ireland equivalents; and Amendment No. 136, which deals with Clause 40(3)(a), to leave out the power to give fixed monetary penalties. I speak, too, to Clause 40 stand part.
These are all probing amendments, but they probe a very important question. Their purpose is to invite the Minister, who stands alone, unlike Horatius guarding the bridge, to look with favour on the matters that I am about to address. Will the Government think again about the whole question of whether it is really right to oust the jurisdiction of the ordinary courts and hand immense prosecuting powers to officials?
In July, the Prime Minister said that a major purpose of his Government was to hand back executive powers. This Bill in a sense does the opposite, as it transfers enormous powers in the whole field of regulation away from supervision by the independent courts and puts them into the hands of officials—some civil servants and some other public officials. These powers include the power for quite junior officials to impose fixed penalties for comparatively minor criminal offences, as they now are, under some hundreds of statutes and statutory instruments listed in the Bill. On top of that, they include the power of more senior officials—at least I assume that they are more senior—to impose variable monetary penalties as well as to make some discretionary requirements. These discretionary requirements—the stock orders and compensation orders and so on—have certain merit, and I should like to keep that merit in play. However, the monetary penalties are of a large amount and may be very large indeed.
Professor Macrory, on whose generally excellent work this Bill is based, none the less takes a view that there is what he describes as a “compliance deficit”. That is not an expression that one would immediately jump for, but he means that there is not as much compliance as there ought to be. He thinks that some penalties are too small. For example, he criticises as too small the penalty of £4 million imposed on one public utility in relation to a very serious health and safety incident in which four people were killed. He may or may not be right about whether that was the correct penalty, but I would submit to the Government that it is the kind of matter—although it may be an extreme example—that should be dealt with by the courts, not one that should be dished out by an official with an appeal only to a first-tier or other type of independent tribunal.
The point is that they are criminal penalties and we already have a very satisfactory system whereby these matters go to the magistrates’ courts or the Crown Court with all the procedural and legal protections that have grown up carefully over the centuries and recent decades, to which our citizens are entitled. That system is criticised by Professor Macrory, but I shall come back to that, because the real criticism lies much more with the prosecuting authorities than with the courts. The magistrates are well capable of selecting the correct penalty provided that they are given the proper information by the prosecutors as to the background circumstances, the amount of money that might be saved, the incentives for wrongdoing and so on. Provided that the courts are given that, magistrates are well capable, in my experience, of giving appropriate and often condign penalties—and that happens no less in the Crown Court.
What the Bill will do, via what the Delegated Powers Committee has rightly described as an unprecedented use of statutory instruments—because this Bill really is a mountain of statutory instruments—is to seek to create a parallel system of justice, entirely run by officials, with its only safeguard being an ultimate right of appeal, if the subject can afford it, to an independent and expert tribunal, which is sometimes described as a first-tier tribunal. In the first instance, the Bill proposes that these powers should be exercised by officials acting on behalf of the 28 “designated regulators” listed in Schedule 5.
I support the broad general objectives of the Bill and my concern is not about those. In this crowded and sophisticated island, as in all sophisticated modern societies, a significant degree of regulation is required. The suggestion is that it may be better done through a measure of instruction or guidance from what is called the “Local Better Regulation Office” in the Bill—it is really a national or central better regulation office that seeks to regulate people better locally, which I suppose is the reason for the use of the word “local”. I strongly support the requirement also expressed in the Bill that the regulation should be transparent, accountable, proportionate and consistent. Those are important principles, but there is a danger that they become buzzwords. I suggest that the transparency of the present system is probably a good deal greater than what is proposed.
I believe that the courts, when given the proper material, would work even better than they do today. The Bill could operate perfectly well using properly our existing court structures that people know and trust. No one likes to be taken to court, but our system of magistrates and Crown Courts is understood and respected. It is also transparent. Hearings are held in public and are reported in the newspapers. If the lower court goes wrong, it is accountable to a more senior court. The penalties are proportionate. For example, the magistrates can give a penalty of anything from an absolute or conditional discharge, up to the maximum penalty that the courts allow. That is also the case in the Crown Court, where fines are frequently unlimited. The courts are also on the whole consistent and much effort is taken through sentencing guidelines and through the Magistrates’ Association, as well as through a substantial amount of government legislation, to see that this is so. I believe that the new system is much less transparent and does not seem to be proportionate. Can the Minister explain—no doubt those behind him will help—how it is said to be accountable?
The fixed penalty system that is proposed seems to come largely out of the blue to the alleged wrongdoer. One hopes that in practice he would get a letter of warning beforehand, but it certainly is not required. If the wrongdoer accepts the penalty, there is no court hearing and there is no guilty plea. Reading the background material, I get some impression that it might be publicised on a website, and it may be that the press will look at that website, but the degree of publicity and transparency is, I suggest, a lot less than the well-tried magistrates’ courts.
It is said in the background documents that one of the things that businesses dislike, which is given as a reason for the Bill, is the thought that their misdemeanours will be exposed in court. Is that a bad thing? Is it wrong that if someone is selling substandard meat or breaking trading standards regulations, we, the public, should not be able to know? I declare an interest, as I was a barrister for 40 years. I grew up with the Trade Descriptions Act 1968 and carried out in the divisional court a number of the follow-ons of Tesco v Nattrass. If Tesco gets it wrong, is it not right that the burghers of Hemel Hempstead should know about it?
How can the fixed penalty system be proportionate? Can the Minister explain a little further how it works? My understanding is that statutory instruments will either set out a single, one-size-fits-all penalty, or may make the penalty relevant to the number of days that the wrongdoing has occurred, or the amount of food that was sold that was wrong, or something of that sort. Basically, there is not the flexible penalty that is available to the courts. Can the Minister give some examples of what level it is likely to be set at in a sample of different types of offence? How will it take account of, for example, the circumstances of the offender? Is it right that a small business or an individual should pay the same penalty as a huge and powerful corporation? If that is not intended, perhaps it could be more fully explained. It certainly was not clear to me from reading Professor Macrory, but perhaps I missed something.
As the Minister knows, this matter was carefully considered by the House of Lords Select Committee on the Constitution. I have in front of me its reply. On 4 December 2007, the Select Committee published its report on the Bill. The committee says, in heavy type:
“The scheme envisaged in the bill will enable the transfer, on an unprecedented scale,”—
that same word “unprecedented” was used by the Delegated Powers and Regulatory Reform Committee—
“of responsibilities for deciding guilt and imposing financial sanctions (with no upper limit) away from the independent and impartial judges to officials”.
Referring to our constitutional history, the report says:
“An element of the core meaning of the rule of law is, in the words of A.V. Dicey: ‘that no man is punishable or can be lawfully made to suffer in body or goods except for a distinct breach of law established in the ordinary legal manner before the ordinary Courts of the land. In this sense the rule of law is contrasted with every system of government based on the exercise by persons in authority of wide, arbitrary, or discretionary powers of constraint’”.
“Although many aspects of Dicey’s account of the rule of law are now contested, this passage in our view continues to provide a powerful reminder of the importance of the role of ordinary courts”.
The report also criticises the failure of the Bill to meet the minimum requirements of procedural fairness. Fixed monetary penalties can be imposed without any requirement for a notice of intent or an opportunity to make representations before the penalty is imposed. The committee continues:
“We are unconvinced that this meets the minimum standards of procedural fairness an accused person ought to have in relation to what are ostensibly criminal offences. The bill as currently drafted risks excluding a basic common law principle of natural justice: audi alteram partem (hear both sides before making a decision). The onus will be placed on the individual or company to seek first an internal review and then an appeal to the First-tier Tribunal (the new general purpose tribunal established by the Tribunals, Courts and Enforcement Act 2007)”.
I ask the Minister to provide us, either in Committee or prior to Report, with some further information about this unprecedented scale. How many local authorities and other officials will exercise this power? My impression is that it will be exercised by all local authorities—I think that there are about 400, but the noble Lord, Lord Borrie, the Minister and others will know better than me—and by many officials in each, so that the figure for officials exercising these powers will run into the thousands. How many cases are these local authorities currently bringing? I have put down Parliamentary Questions for Written Answer, as I mentioned to the Minister a few days ago, to the nine different departments responsible for the 28 authorities in Schedule 5, to ask, in respect of each of those designated regulators, how many prosecutions they have brought and how many convictions they have obtained.
So far I have received two replies, but there may be more in the post. The Department for Transport says that the Civil Aviation Authority, from 2004 to date, carried out 89 prosecutions and obtained 86 convictions. The Office of Rail Regulation, coupled with Her Majesty’s Rail Inspectorate and the CPS on somebody’s behalf, have, since 2004, carried out 37 prosecutions and obtained 36 convictions. It would also be helpful if the Minister could indicate to us in how many such cases there were pleas of guilty. It sounds, given that high conviction rate, as though there were a lot of guilty pleas; it does not sound like a difficult process to carry out.
How many more penalties is it anticipated will be imposed when, if the Bill goes through unamended, every one of the thousands of officials involved has the power simply to impose either fixed or variable penalties? In how many cases is it anticipated that these will be appealed to the independent tribunal? This is likely to be a time-consuming and costly business. It may all right for large corporations, but for small and medium-sized businesses and individuals, it may be a great burden. I remind the Committee that, unless you have costs awarded against you, the courts are there, they exist, are well established and are free. That is a great advantage.
I look forward to the Minister’s answer on these numbers, but draw attention to some information which I have obtained from reading the background documentation to the Bill, particularly the interesting final report of Professor Macrory of November 2006, Regulatory Justice: Making Sanctions Effective. This tells us on page 40, footnote 39, that, in an unspecified period—but I assume it was the most recent year; 2005-06—15,369 cases were heard in the magistrate’s courts, and a further 76 in the Crown Courts. But page 17 suggests that it was 24,000 plus a further 11,000, some of which were cautions and some prosecutions.
How these are broken down between all the different regulators is unclear, but page 21 gives some further information. For example, the Environment Agency carried out 887 prosecutions and obtained 876 convictions, with an average penalty of £5,007. For the Health and Safety Executive, the figures were 1,267 prosecutions and 999 convictions, with an average penalty of £6,855, excluding some of the very high penalties that were obtained. For the British Potato Council, there were 246 prosecutions, but only 28 convictions, and the average penalty was £488—I notice that the British Potato Council has not received the accolade of an appearance in Schedule 5. For Companies House, there were 5,867 prosecutions and 2,944 convictions, but the average penalty was not available. The FSA carried out six prosecutions and obtained six convictions with an average penalty of £75,500. Could the Minister clarify whether they were prosecutions in the courts since the FSA has already had powers for some years somewhat similar to those that are proposed to be extended to these other agencies in the Bill? The Pesticides Safety Directorate did three prosecutions and obtained one conviction with a penalty of £1,800, and the Food Standards Agency brought 570 prosecutions and obtained 458 convictions, but the average penalty was not available. Are these figures complete? In relation to broadly food standards matters, I would have thought that trading standards officers up and down the country probably brought many more cases, but it may be that they fall into a different category.
In the context of the above figures, I shall ask the Minister some questions about practical problems for officials under the new system. We are told that the Bill and statutory instruments will require an official imposing a fixed monetary penalty to be satisfied before he does so to the criminal standard of proof that the offender is guilty. That is a strange concept. The Minister will probably be aware that under the code for Crown prosecutors, if a Crown prosecutor wishes to bring a prosecution a much more practical standard is required; in other words, the prosecutor must be satisfied that there is a realistic prospect of conviction, which means that it is more likely than not—some people say 51 per cent likely—that a prosecution will be obtained.
I can see that in some cases it may be quite easy to say that you are sure that there is guilt. If the offender is carrying out an activity—for example, waste disposal—and does not hold the necessary licence, there may be no defence, although there may be issues about whether he was carrying out the activity, which might be more difficult. The only question that remains, although it is an important one, is whether it is in the public interest to prosecute. It looks as though the Environment Agency, which obtained a 99 per cent conviction rate in the figures I read out, probably brought a lot of cases where it was obvious that there was guilt and that the official could easily have made the necessary judgment. But what about the Health and Safety Executive? There, out of 1,267 cases, 268 seem to have been acquitted. The penalties were quite high—an average of £6,855—so they would have been variable monetary penalties, I assume. But given that, on average, one fifth of cases were being lost, how could an official be confident that they were all guilty in the first place, which is the requirement under the legislation? Likewise, the Food Standards Agency, which failed to get a conviction in 25 per cent of its cases and, even more so, Companies House, which failed to convict in 2,944 cases out of 5,867. It may be that there is an explanation, but these are pertinent questions and we would be grateful to have the explanation.
I shall ask the Minister about compliance with the European Convention on Human Rights. The noble Lord, Lord Jones of Birmingham, stated that in his view the provisions of the Bill were compatible with the convention. Department lawyers have no doubt rightfully considered this question. In the light of the Select Committee’s questioning of the procedural fairness, will the Minister help the Committee as to how the scheme of the Bill, which makes public officials investigator, prosecutor, judge and sentencer in their own case, meets the requirements of Article 6 of the convention? Article 6 provides that:
“In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgement shall be pronounced publicly by the press and public may be excluded”.
It goes on:
“Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law”.
This Bill seems to require the official to presume him guilty. Thirdly, it states that:
“Everyone charged with a criminal offence has the following minimum rights”,
prompt information of the nature of the case, adequate time to prepare his defence, legal assistance if he needs it, and the power to examine witnesses and bring witnesses of his own—I am paraphrasing slightly.
I anticipate that the Minister will give a similar answer to the one the noble Lord gave to the Select Committee when he kindly wrote to it on 18 December 2007—I have the letter here. He relied on the existence of the tribunal—but it is an elaborate and cumbersome process and it only comes at a very late stage. It would be helpful to the Committee to see the legal arguments. I am not asking to see the Law Officers’ opinions, but to see at least set out with reasonable coherence the legal arguments which back the opinion of the noble Lord, Lord Jones of Birmingham, so that we may understand this more fully.
In my view, it is responsible criticism that these statements are made by Ministers on fairly flimsy grounds. In my time in the other place during the passage of the football hooligans Bill, I remember that in the course of about an hour during one of the Committee stage sittings—it was a Committee of the whole House—provision after provision was cast aside as soon as it was pointed out that they were flagrant breaches of the convention.
I return to my main theme. I apologise for speaking at some length, but I would hope that my further amendments will go very quickly. This brings me back to my argument under the clause stand part debates on Clauses 34 and 40, which is to ask the Government to think again about this whole substitute system of justice. My worry is that the proposed scheme will have two great faults. It will encourage a lot of tick-box prosecutions or fixed penalties with targets being imposed on officials to demonstrate enforcement activity. This is unlikely to be light touch. In other cases, where representations are made, the procedure is quite elaborate. As the Minister said in his letter of 18 December to the Select Committee, the regulator will need to set out its case against the person subject to the sanction in the penalty notice. That person has an opportunity to challenge that case by way of an internal review. The subject may raise objections and defences to the case against him. The regulator is obliged to withdraw the notice if he is satisfied that a person has a defence to the offence. If the regulator does not withdraw the notice, it must give reasons for its decision. All this will be subject to the scrutiny of an independent tribunal by way of appeal.
Does that mean that you start an appeal as a convicted person to seek to prove your innocence, or is it the other way around? Is the independent tribunal going to be told what the penalty was in the first place, or will it come to the matter de novo as a matter of fairness?
My fundamental question is: is the proposed system really better than the existing one? If it is decided to prosecute in the tick-box cases, there will probably be pleas of guilty or acceptance of the penalty. Too many of these cases may well be oppressive. They are attached, for reasons one can well understand, to provisions which state that if you have not paid within 14 days, the fine goes up from £100 to £150; and if you have not paid within another 28 days, it goes up to X hundred; and that after that the matter goes to the county court for enforcement. Big corporations can cope with these things, but for citizens they can be quite frightening.
I declare an interest. From time to time, I forget to pay the congestion charge and over Christmas I lost the letter telling me that I have failed to do so. One finds the blood pressure rising a little when one sees how the penalty can escalate in quite a short period. This measure proposes the scheme not just for motoring matters—no one can ever be sympathetic with a motorist—but for hundreds and thousands of people up and down the country in the whole regulatory area. Is this the kind of country in which we wish to live?
What is the complaint against the present system? It is said by some—and by Professor Macrory to some extent—that the court system is cumbersome and takes too long, but the background documentation suggests that at present the average time from committing an offence to judgment is, in many cases—possibly most cases—seven months. There is a reference to 11 months somewhere else. I wonder whether the new system will be that much quicker.
The background documentation mentions training. How many hundreds of people will have to be trained to create this new parallel court system, run by and for officials, and to what standard? This whole idea of certainty before a prosecution is brought sounds either unobtainable or artificial. The code for Crown prosecutors, as I have explained, is that there must be a realistic prospect of conviction, which seems much more practical. The prosecution must also be in the public interest. I return to that because Lord Shawcross, in his classic statement in the 1940s, said emphatically that not every case of guilt should be prosecuted and he hoped that such cases never would be—I see the Minister indicating that he would not hope that they were all prosecuted—but read Macrory and, time and again, he says that there is a need for more enforcement and so on. Let it be done through the courts.
Asking a prosecutor to know for certain whether he would get a conviction is too high a standard. I suspect that this provision has been put in by those drafting the Bill partly because the Government realise that, although this is described as a civil system, it is not a civil system at all; it is a criminal system under a civil disguise. The Minister will know that the European Court of Human Rights in such cases looks not to the label but to the substance of the matter. If very large penalties, which have been criminal penalties before, and possibly even smaller penalties, which have been criminal penalties before, are suddenly stated to be civil, the European Court at Strasbourg is quite likely to say, rightly, that these are criminal matters and that criminal standards must be applied.
Finally, why are the courts criticised? I am drawing to a conclusion. It is said that they are cumbersome; that magistrates impose penalties that are too low and, therefore, prosecutors are reluctant to prosecute; and that there is a so-called compliance deficit. The Magistrates’ Association has responded that the main problem is that prosecutors fail to provide sufficient information to justify the high penalties that they seek. That should be quite easy to put right. Today, magistrates are very well trained. There are 28,000 of them up and down the country who perform a massively valuable public service and they are trusted. Environmental issues are high on everyone’s agenda, as are health and safety and food safety. I ask the Minister how many people currently prosecute these cases nationwide. I have made some inquiry from colleagues at the Bar and my understanding is that the quality of prosecution, which sometimes is very good, varies considerably. Some is not good and too often magistrates are not told enough of what they need to know for them to be satisfied that a higher penalty is called for, if it is.
I revert to paragraph 5 of the Select Committee’s report. This emphasises, first, the complex nature of the schemes and ministerial powers by direction to suspend regulators’ powers; secondly—a point that I have developed at some length—the extent to which it is constitutionally appropriate for regulatory authorities, rather than the ordinary courts, to make determinations about whether a person has committed a criminal offence and to impose unlimited financial penalties; and, thirdly, whether the procedural protections match up to minimum standards.
At this stage, I ask the Minister to give us the further information that I have outlined and I invite his department and the Secretary of State to reflect carefully on whether laudable objectives in other parts of the Bill cannot be even better enforced by continued use of our tried and tested courts system with perhaps some further training for the courts and the prosecutors.
I share the concern of the noble and learned Lord, Lord Lyell of Markyate, about this part of the Bill. It paves a way around the jurisdiction of the court and instead gives officials considerable prosecuting powers. I can anticipate the response of the noble Lord, Lord Bach, to these probing amendments. He will say that the current court procedures are too time-consuming and cost the country a lot of money to hear each year. That may well be, but this system is far more accountable, transparent and consistent—supposedly the aims of the Bill—than what the Bill in fact proposes.
The fixed and variable penalties, which the Bill gives the regulator the power to wield, are criminal penalties and therefore regulators do not have the right to instruct or implement them. That is the role of the court, which is founded on the concepts of accountability, transparency and consistency—all the words that the noble Lord, Lord Desai, feels are just too much when he talks about the Bill. I cannot think of any other way for us to express this. Does the noble Lord, Lord Bach, not think that giving such powers to the regulators makes a dangerous statement of little faith in the legal system which is essential to the protection of British citizens? I ask, as did the noble and learned Lord, Lord Lyell, that the Government look again at the tried and tested courts system.
We have listened to the noble and learned Lord, Lord Lyell, with tremendous interest. It was a brilliant speech, covering a great many of the matters concerning Part 3. It is excellent to deal with it in principle now and we shall deal with it in great detail under the amendments to come. When he referred to the House of Lords case in Tesco v Nattrass, I was reminded that that was one of the fairly rare cases in which a chief trading standards officer—I think, for Cheshire—Mr Nattrass, was reported as handling this very difficult case right up to the House of Lords. It began in the magistrates’ court under the Trade Descriptions Act 1968, which has its 40th anniversary this year. It is a regulation that I hope Members of the Committee on the other side will recognise as having had a great deal of success in improving marketing displays, marketing and advertising and all the requirements of honesty that that Act introduced. It has been, as the noble and learned Lord rightly said, dealt with by trading standards officers as prosecutors and then by the courts, be it a magistrates’ court or sometimes a higher court resolving guilt or otherwise. I am sure that my noble friend the Minister will agree that it is well worth having this general debate at the outset of discussion on Part 2.
In my Second Reading speech, I thought it unusual and peculiar that the phrase with which everyone, not just lawyers, is familiar as regards the standard of proof required in the criminal courts—“beyond reasonable doubt”—should appear in a new guise in the Bill. It is not the prosecutor having to prove in the courts beyond reasonable doubt that guilt is established; it is that the official should satisfy himself beyond reasonable doubt. He does not need to satisfy anyone else at all. That appears in Clause37(2), and it is most unusual, but I am sure that the Minister will deal with that.
I want now to suggest that there is merit in that and in the whole of Part 2, which stems from Professor Macrory’s report. There is benefit to the public interest. There is also benefit to businesses, which are likely to be defendants in these cases, of a greater flexibility than the one and only procedure now available; that is, prosecution for a criminal offence with a criminal conviction, and all that that means, if guilt is proven either in the magistrates’ court or in the High Court by the finding of a jury. Provided that there are sufficient procedural safeguards, the flexibility in Part 2, including the provision for fixed or discretionary penalties, is what business has indicated it would be happier with, instead of always being faced by regulators who say, “Either you get away with it, or you have to be prosecuted for a criminal offence”.
Many matters are not worthy of the court’s consideration—taking up the time of either a judge in the higher courts or of the part-time judges, the magistrates, in the lower courts. Sometimes they are stipendiary magistrates, to use the old phrase; now called district judges. Whether the judges are paid or unpaid, many matters can be put right often in discussion. If that is not sufficient, the procedures provided here—I will not go into the detail of stop notices, discretionary payments, fixed payments and so forth—will serve, provided that the procedural safeguards are adequate.
I agree with many of the remarks made by the noble and learned Lord, Lord Lyell, but I think that he went a little too far in suggesting that the procedural safeguards were not adequate. Sticking to fixed monetary penalties, let us look at Clause 38. Others have suggested different wording—the noble Lord, Lord Goodlad, has tabled an amendment. However, as the Bill stands, Clause 38 requires that there must be a notice with reasons: the businessman has the opportunity to ask for a review, with reasons, giving his reply; and then the regulator can think again. In his review, he will either confirm the penalty or not. If he sticks to his original view and confirms the penalty, there is a right of appeal. We can argue about who should hear the appeal and I do not want to go into that. I am talking about matters of principle which are procedural safeguards. The Bill is not lacking in them.
I have spoken quite long enough in my intervention on this matter.
The situation is not as the noble Baroness has described. It is not that I do not like transparency, accountability and proportionality; I was objecting to efficiency, economy and effectiveness being bundled together. As a non-lawyer, and having sat on the Delegated Powers and Regulatory Reform Committee for some time, I feel that we have a problem when people promise to cut red tape, everyone saying that it should be cut. When it comes to it, others say that the cuts are too drastic and too quick. They want us to go on with the old-fashioned, tried-and-tested ways. They want us to return to the original practices.
What I see from Part 3, not as a lawyer, but as a selfless citizen, is that here is a procedure that is quick but which has inner safeguards so that if mistakes are made there is some redress. I agree with my noble friend Lord Borrie that the criminal standard is the safeguard. That is a safeguard that an ordinary local authority official does not have the magistrate’s ability to judge. He cannot impose a fixed penalty unless he is sure beyond reasonable doubt that an offence has been committed. We ought to welcome that, because it is a very high hurdle to jump over.
We ought to ask: is this going to be quick and efficient? Yes. Are there safeguards to guard against someone having been very arbitrary? Yes. There is a splendid, elaborate diagram on page 30 of the guide showing each stage where a person who feels badly done by can appeal. If there is injustice, it will take a long time to sort things out as it is at present, going all the way to the House of Lords. In a number of cases, it may be much easier and quicker to do it this way as provided for in these clauses. We ought to think of the efficiency of regulatory reform; does this reduce the regulatory burden or not? In my view, this is one good way of doing that.
I am not capable of adding to the great constitutional arguments advanced by my noble and learned friend Lord Lyell, but I have one query on the use of the word “civil”. The sanctions are described in this clause as civil, but my noble and learned friend has explained that in many respects they are, in truth, criminal sanctions. After all, they all refer to offences. How can they be civil sanctions if they are against offences? The relevant subsequent clauses, such as Clause 37, refer to the penalties being imposed for an offence. If it is an offence, presumably it is a criminal sanction rather than a civil sanction. Why is it described as civil?
This has been a very welcome debate, and the Committee will be grateful to the noble and learned Lord, Lord Lyell, for his tour de force in putting his case, which was so obviously well researched and which was expertly put. One would expect nothing less, and obviously a great deal of work has gone into that speech. He described it as probing and a little bit more; using modern jargon perhaps it could be described as “probing plus”, with a lot of the plus. We are very grateful to him. I hope he will not expect me to be able to answer a large number of his questions, and I am not going to go into all the comments that he made. I promise him and the Committee—there have been letters and he mentioned them—a further, considered letter, which will be placed in the Library before Report. I do not promise that it will be done this week, or even next, but it will be done as soon as we can and before Report, to deal with the many issues that he raised, which can be found in today’s Hansard. I hope he will forgive me if I do not go down the road of trying to attempt to answer, which I could not anyway, the many points he raised. I will do my best with the general principles and with some of the specific points that have been raised by him and by other noble Lords who have spoken in this debate.
In the final report of his review, published in November 2006, Professor Macrory found most regulators to be overreliant on criminal prosecution as a means of tackling breaches of regulation. The scheme put forward in Part 3 is very much the Macrory scheme. I am sure there are differences between Macrory and this scheme in detail, but this is the Macrory scheme. He identified what he called a “compliance deficit” where non-compliance has occurred but no enforcement action is taken because the appropriate tool is not available to the regulator. He went on to say that this is an extremely inflexible system that has insufficient benefit for all the interested parties: the business that is being regulated, the local authority with the duty of regulation and the general public—the consumer who is meant to be the beneficiary of regulation.
What is the compliance deficit that Macrory talked about? It is where non-compliance has occurred but no enforcement action is taken because the appropriate tool is not available to the regulator. Macrory found that for certain offences many regulators do not have access to any sanction except criminal prosecution. This lack of flexibility constrains their ability to respond effectively to regulatory non-compliance. He thought that a heavy reliance on formal criminal sanctions makes the resolution of cases a costly and time-consuming exercise for business and regulators. In many instances, although regulatory non-compliance had occurred, the limited resources within regulators means that the cost or expense of bringing criminal proceedings deters the regulator taking action, creating what Macrory defined in a neat phrase, if not entirely to the satisfaction of the noble and learned Lord, as the “compliance deficit”. He set out a regulatory system that would allow for a flexible and proportionate approach—I agree with the noble and learned Lord that when those words are used they must be used as though they mean something, and I argue that “flexible” and “proportionate” in terms of Macrory do mean something—with a broad range of sanctioning powers, where regulators could respond to the needs of individual cases and the nature of the underlying offence. Unfortunately, not everybody was able to make the open house session held on 15 January, but I know noble Lords will have heard about that important session from third parties who were able to hear Professor Macrory speak first hand about his review and his powerful case for change.
Part 3 implements the main legislative recommendations of Professor Macrory’s report with the aim of putting his principles into practice. I should remind the Committee that there has been general support for the new scheme from a number of groups, including local authorities; business representatives, for example, through the Institute of Directors; individual businesses; some regulators’ representatives, trading standards, for example; and—this will be of particular interest to the noble and learned Lord—the Council of Her Majesty’s Circuit Judges and the Justices’ Clerks’ Society. The fact that all these worthy bodies support Professor Macrory’s scheme—in general; I am not going to pretend that they support it in every detail—of course does not mean that it is necessarily right. But it is powerful support for what we believe to be a powerful scheme.
The scheme creates a framework within which regulators can acquire access to a suite of civil sanctioning powers in addition—and this is important—to their current criminal sanctions. Not all the powers will be needed in all cases; sometimes comparable powers already exist, sometimes they will not be appropriate in a particular context. I agree with the noble and learned Lord on the importance of the role of criminal courts in dispensing justice and punishment—as how could I not, having spent the best years of my life practising in them? The new civil sanctions in Part 3 are an alternative to criminal prosecution, but prosecution will remain the right course of action for many of the more serious, egregious offences. The sanctions are part of a wider package of recommendations made by Professor Macrory, all of which are aimed at improving enforcement of regulatory regimes generally. As my noble friends Lord Borrie and Lord Desai have said, that is really what the Bill is trying to do. That particular aim of the Bill has general support, I think.
Civil sanctions are already an established part of the regulatory enforcement landscape, although not all regulators have access to such sanctions. The noble and learned Lord referred to the FSA, which has similar but not the same type of effective civil sanction. I do not know whether the noble and learned Lord thinks that they have worked well or not so far. Part 3 will enable those powers to be extended to a number of other regulators that do not at present have such powers.
The Constitution Committee is a very much respected committee of this House. The noble and learned Lord is a member of it, and I am delighted to see that the noble Lord, Lord Goodlad, the distinguished chairman of the committee, is part of our proceedings this afternoon. The committee has genuine concerns about these Part 3 powers. That is why we have limited access to the new sanctions to those national regulators listed in Schedule 5, those that enforce the offences listed in Schedule 6—basically, local authority-type offences—and those who enforce offences in secondary legislation made under enactments listed in Schedule 7.
We believe that the Bill includes a number of important safeguards for those subject to a civil sanction. In short, businesses will know the nature of the case against them, as there are information obligations in the notice imposing the sanctions. There are also opportunities to make representations and objections to challenge the sanction. In particular, there will be a right of appeal, which is significant in my view, to an independent and expert tribunal whose membership will comprise both judges and non-legal experts in a particular regulatory field. Regulators will also be required to issue guidance on the enforcement of offences and the use of particular sanctions so that the regulated community will be fully aware of its rights to challenge sanctions. The package provides important protections for persons subject to these civil sanctions. In general terms, that is how we put our case.
I shall deal with one or two of the important points that the noble and learned Lord raised—not all of them but some of them. He made a strong case about what criminal cases, by their very nature, allow for with regard to transparency and accountability. He asked, rhetorically, whether it was in the interests of the general public that when Tesco, Sainsbury’s or Asda—I cannot go through all of them—offend against regulations, that should not become public.
I can tell the noble and learned Lord that regulators will be able to publicise details of civil enforcement action. This is accepted government policy and a recommendation of Macrory himself. Regulators are also required by Clause 62 to publish an enforcement policy explaining when they might use their criminal or civil sanction powers. The noble and learned Lord has of course read the letter from my noble friend the Minister—as he was one of those who received it—about the minimum requirements of procedural fairness and what fixed monetary penalties are actually aimed at. A further letter will be coming, but I shall read a small part of the earlier one:
“As the Guide to the Bill makes clear, FMPs are aimed at low level non-compliance. It is envisaged, for example, that notices will be used for ‘strict liability’ offences, that is, cases where liability is satisfied simply by a person committing a particular act”—
no state of mind being necessary. Moreover,
“the prosecution does not have to show an intention to act, or any blame-worthy conduct. Examples could include failure to hold a licence for a particular activity or failure to ensure food labelling on individual items complies with current legislation”.
I emphasise the next line:
“FMPs are not intended to be used for more serious or more complex instances of non-compliance”.
The noble and learned Lord asked a number of searching questions about what criteria for fixed monetary penalties would be used, whether they would be the same for everybody and whether distinctions would be made. Fixed monetary penalties can and will vary depending on prescribed criteria. For example, a penalty may vary depending on the size of the business—which the noble and learned Lord was asking about—and may therefore take account at a general level of the circumstances of the offender. The Minister may of course determine the criteria when conferring powers by an order debated in Parliament. The process is to be found on page 29 of the guide, and I do not want to take up the Committee’s time by quoting from it.
There has been talk about safeguards; I mentioned them in my answer. There are safeguards that will protect those who fall foul of the civil sanctions. One of the most important is that there will be a right of appeal to a tribunal at a fairly late stage, but not necessarily very far down the line, in these matters. A person can challenge the regulator’s determination of his liability to a civil sanction by raising one of the grounds provided for in the Bill. Generally speaking, a regulator’s decision may be overturned on the basis of an error of law or fact, or that it was unreasonable, allowing the tribunal to examine matters of law, fact and discretion. The tribunal will therefore be well placed to scrutinise the regulator’s decisions. I make it clear that the imposition of these civil sanctions will not constitute convictions, which business will no doubt be grateful for.
The noble and learned Lord made an important point about the burden and, in particular, the standard of proof that the Bill sets out for these measures. He rightly points out that a Crown prosecutor only brings a prosecution if there is a realistic chance of conviction. However, it should be noted—and the noble and learned Lord will probably be more aware of this than anyone else in the Committee—that that is a separate test from the one that the criminal courts must themselves apply when they come to consider the question of conviction or otherwise. A court can only impose a sentence if it is satisfied that the defendant’s guilt is beyond reasonable doubt; a statement of the obvious that applies as much to the regulator. Its significance is to be found in the right of appeal to an independent tribunal, which must take that matter into consideration when deciding the appeal. That is a substantial safeguard.
The noble Lord, Lord Cope, asked, as always, a pertinent question: are these really civil sanctions? They are an alternative to criminal prosecution. The underlying offence is a criminal one, but the regulator will have the choice of pursuing a criminal prosecution or imposing a civil sanction. These are civil sanctions because they will be imposed administratively.
Anyone who heard Professor Macrory will not be surprised to hear me say this—he emphasised that the criminal prosecution system will and should continue to play an important part in these matters. This provision is not to get rid of court cases so that none is left and everything is done by civil sanction. He said that there are clearly cases which have to be dealt with in that way, and that they should be dealt with in that way.
I turn quickly to the amendments. Amendment No. 104 would prevent a Minister giving a regulator access to a discretionary requirement. Amendment No. 136 would remove variable monetary penalties from the list of discretionary requirements in Clause 40. Discretionary requirements are a key component of the Macrory scheme. The package of new sanctioning powers comprise variable monetary penalties, compliance notices and restoration notices, which will allow regulators to tackle non-compliance in a more imaginative and more effective way.
Variable monetary penalties are designed to be flexible enough—and we will come on to them in due course; I hope this afternoon—to capture the financial benefit to the business arising from non-compliance in order to ensure a level playing field for compliant businesses and to deter future non-compliance. Again, that is a key recommendation not just of Macrory in this case, but of Hampton too.
Amendment No. 109 would remove the exclusion of the police and prosecution authorities, such as the CPS, from the definition of regulators in Clause 35. The new powers in Part 3 are an alternative to criminal prosecution. The latter course of action will remain available to the police and prosecuting authorities. The powers in Part 3 are designed specifically for use by regulators. We do not think that it is appropriate to extend their usage.
I add that under Clause 66 police and prosecution authorities will be able to refer matters to a regulator if they consider that a civil sanction may be more appropriate. I do not expect my response to have changed the mind of the noble and learned Lord, but I hope that this has clarified some of the issues, and that the letter I have promised will clarify others. I thank him again for introducing the debate.
I thank the Minister for a very full and careful answer and for the promise of further information. The further information will be of real help to the Committee and the Chamber because, while kind things have been said about the work I put into this, I have not achieved everything by any means. I have just seen a Regulatory Enforcement and Sanctions Bill impact assessment, which my noble friend Lord Cope passed to me. That suggests that there will be something like an increase of about 4,000 or 4,500 cases a year. It looks as though, if I have read it correctly, there will be some 13,000 cases in the future, a quarter of which are estimated will go to appeal.
The figures the noble Lord will give us—perhaps he will put a copy of them in the Library at the same time—will show what the ambit is. From the Macrory report I obtained about 15,000 cases. Then I looked at other tables in the report and I obtained more than 30,000 cases. Far more cases may be going on than the impact assessment suggests.
There will be about 4,000 appeals. If I have read and got the figures right—I can be corrected by letter if necessary— and according to page 33 of the impact assessment, the total cost to business of preparing for an appeal before the independent and expert tribunal will be approximately £1.6 million. That is £400 a case. I doubt that a solicitor would be able to do it in three or four hours, and given the price of even a country solicitor that would mop up a good deal more than £400. It certainly would do so by the time there had been a hearing and so forth. The burdens may well therefore be underestimated in the minds of those who prepared the assessment. That is why I returned to my point that we have the ordinary courts that are well understood.
I am grateful to the Minister for pointing out that Professor Macrory suggests constructive ways of improving the use of the courts. I am glad to hear that a substantial use of the courts will continue. The Minister has been kind enough to say that he will go back and look at the matter. Obviously, he has made no commitment to change anything and I fully appreciate that. There are serious issues, but in the light of that, and thanking him for the further information that is to come, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 105 not moved.]
moved Amendment No. 106:
106: Clause 34, page 14, line 21, leave out subsection (3)
The noble Lord said: After my noble and learned friend’s constitutional whale, this is a drafting minnow. Amendments Nos. 106 and 162 move the phrases in subsection (3) to a more appropriate place in the Bill and do not alter them. They move them to Clause 59.
When reading Bills, I am always conscious that when they become Acts they will have to be read by people who must use them. Some consistency in drafting is therefore helpful. Each of Parts 1, 2 and 4 have the equivalent provision at the end. In Part 2, the provision appears at the bottom of page 13:
“An order under this Part is to be made by statutory instrument”.
In Part 1, the provision appears in Clause 18; in Part 3, it is in Clause 32; and in Part 4 it is in Clause 69. In those three cases, it appears at the end of the part, but in Part 3, the equivalent provision is at the beginning. As a result, it is divorced from the provisions of the parliamentary procedure that is to follow when there is such a statutory instrument. In the other three cases, the parliamentary procedure is adjacent to the provisions. The drafting would be tidied up if Part 3 were drafted in a similar manner. I beg to move.
I should point out that if the amendment were to be carried, I could not call Amendment No. 107 by reason of pre-emption.
I fully support my noble friend Lord Cope in these two amendments. They move the requirement to make the orders under Part 3 from Clause 34 to Clause 59. By doing that, the drafting becomes more consistent and follows the practice used in Parts 1 and 2 of putting the provision at the end of the part and not at the beginning. My noble friend seems to have found favour with his amendments and I suspect that he is likely to find favour with this amendment too. I shall be interested to hear the Minister’s reply.
I thank the noble Lord for moving his amendment. We understand that bringing symmetry from Parts 1, 2 and 3 has some attraction. However, Parts 1 and 2 are structured differently to Part 3 for good reasons. Parts 1 and 2 each include a number of different order-making powers and it is therefore possible and logical for each part to have a separate clause grouping together miscellaneous propositions about the formalities and procedures relating to orders in those parts. But the whole of Part 3 is about a single order-making power. That is set out in Clause 34—the first clause that deals with Part 3—and it seems sensible to include within the same clause provision about the form of the order. A separate clause headed “Orders under Part 3”, akin to that included in Parts 1 and 2, would make no sense in Part 3.
Nor is it possible, as it is in Parts 1 and 2, to have a clause wrapping up all the miscellaneous formal and procedural requirements attached to orders. We understand the sentiments behind the amendments, but I am not sure that they would add anything to the Bill. While I know that this is not an answer to the noble Lord, parliamentary counsel has, no doubt, spent hours looking at the noble Lord’s amendment and, I am afraid, has come to the view that what we have done is better on this occasion.
Amendment No. 162 might lead to greater confusion. The form that the order is to take sits comfortably with the power in Clause 34 to make the order. The procedural provisions sit comfortably together in Clauses 56 to 59. Splitting the form of the instrument from the power to make it, and putting it in with provisions about procedure would not be helpful. It would also necessitate a change in the title of Clause 59 and the subject heading that precedes Clause 56.
I have attempted to deal with the points that the noble Lord made and I hope that he has been persuaded.
I thought that the Minister made half a case for not moving this provision to Clause 59, but not much of a case for divorcing it from the parliamentary procedure to be followed when it is a statutory instrument—that is to say, by moving the contents of what is now Clause 59 and including it in the earlier clause. I am not going to pursue this minnow this afternoon. I may reflect on it and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 107:
107: Clause 34, page 14, line 21, after “instrument” insert “and shall not be made under this section unless the Minister is satisfied that the regulator is fully compliant with any Code issued from time to time in accordance with section 22 of the Legislative and Regulatory Reform Act 2006 (c. 51) for such time as that section shall remain in force”
The noble Lord said: Clause 34 clearly goes to the heart of this part of the Bill, as is indicated by the hour and a quarter that we have already spent on the issue. I did not participate in the debate on the amendment of the noble and learned Lord, Lord Lyell, not only because I do not agree with him, but I thought that the argument had been perfectly well set out by him and I knew that the Minister would do that with his own argument. There are two fundamental principles here that the Government are seeking to implement: first, the Macrory review; and I do not want yet again to go over the ground covered by that discussion—you either accept that Macrory made his case for a better system of sanctions or he did not, whereby the old system should be kept. I happen to agree with the government approach and Professor Macrory.
However, the second set of principles that this legislation endeavours to implement are those set out in the Hampton review. The purpose of the amendment in my name, and Amendment No. 108 in the name of the noble Lord, Lord De Mauley, and others, puts the view that if we are in Clause 24 to give powers to regulators to implement the Macrory review, the Hampton principles should be implemented in the Bill. That is the purpose of my amendment and the amendment in the name of the noble Lord, Lord De Mauley. I have no pride of authorship of my amendment and I doubt if he has of his. We are trying to make the same point. I beg to move.
Before I start on Amendment No. 108, which is tabled in my name, I shall say that I support Amendment No. 107, tabled by the noble Lord, Lord Razzall, which is in line with what we are saying and have been saying in this Committee.
I think that the Minister will say that paragraphs (a) and (b) of my amendment will be dealt with by government Amendment No. 164—he is nodding his head. I am grateful and am happy to let matters rest there so far as they go. However, I want to probe my paragraph (c), which is a point the Government have not taken up. Indeed, the Minister rejected it in the context of clauses we have already debated. It is the suggestion that regulatory activities be carried out on the basis of a risk assessment. The Minister’s rejection was on the grounds that if, as the Bill states, activity is targeted and proportionate, then almost by definition the risks will have been adequately assessed.
When we debated Amendment No. 24, I said that I would try to think of a situation where regulatory activities were targeted and proportionate, but not based on a risk assessment. In very simplistic terms, let us suppose that a large seaside tourist resort has been the subject of widespread abuses of customers by retailers, perhaps by using misleading labelling and overpricing. The local authority might reasonably interpret “targeted action” to be to focus activity on that town. “Proportionate action” could be interpreted as the degree of enforcement that is exercised upon proof that a particular retailer has indeed been guilty of abuse. In my submission, had a risk assessment exercise been carried out at the outset, effort would still have been saved, because the authority would have known in advance that it did not have to investigate certain retailers because they had a history of compliance. My proposition is that whether or not the words “targeted” and “proportionate” imply a risk assessment depends to an extent on each authority's interpretation of the words “targeted” and “proportionate”. A risk assessment is a thoughtful intellectual process that enables the focusing of resources, which is why it is used in Hampton.
I start by welcoming the noble Lord, Lord Razzall, to his place in this Committee. His colleague the noble Baroness, Lady Hamwee, has played an important role until now, and I sure he will play such a role from now on.
Amendment No. 108, to which the noble Lord, Lord De Mauley, has just spoken, is similar to government Amendment No. 164, which I shall turn to shortly. Amendment No. 107, tabled by the noble Lord, Lord Razzall, takes a slightly different approach to the same issue. Again, we sympathise with the intentions, and we would expect regulators to use their compliance with the code as part of the evidence of their suitability to take on the sanctioning powers we propose. However, requiring the Minister to be satisfied that a regulator is compliant with the code would be a step too far. Section 22 of the Legislative and Regulatory Reform Act 2006 requires a regulator to have regard to the code. Amendment No. 107 would instead require regulators to be fully compliant with the code before these powers could be conferred on them. There may be only a small difference between us, but we think that would be a little too onerous.
I shall move government Amendment No. 164 in due course—whether that is today or on another day is a matter of question. In its report on the Bill, the Delegated Powers and Regulatory Reform Committee accepted the general procedure for awarding the powers to a regulator by secondary legalisation, but recommended that the circumstances in which the new powers are awarded should be set out in the Bill. It has always been our intention that only those regulators who are capable of acting in a way that is compliant with the principles of better regulation should have access to the new sanctions, and our amendment gives effect to that.
The drafting of the government amendment is a little different from that of Amendment No. 108, proposed by the noble Lord, Lord De Mauley. Amendment No. 164 requires the Minister making the order to be satisfied that the regulator will act in accordance with the principles of better regulation, as set out in Clause 5(2), when exercising the new sanctioning powers. This makes the approval of regulators more directly related to the exercise of the new Part 3 powers; it also captures new regulators who may not be able to demonstrate that they are currently acting in a way that is compliant with the principles. Instead, the Minister will have to be satisfied that such regulators will act in this way.
The issue of risk assessments was mentioned in Amendment No. 108. We agree that the assessment of risk should be at the heart of regulatory activity. We believe, however, in spite of the noble Lord’s valiant efforts, that this is captured by the words “targeted” and “proportionate”, as a targeted and proportionate approach should be one that is based on an assessment of risk.
Members of the Committee may also be wondering why the amendment creates a new clause rather than making an amendment to Clause 34. This is in order to ensure that the amendment also applies to Clause 60, which extends any power that a Minister has to create criminal offences in secondary legislation to include the power to create alternative civil sanctions.
As for the principles of good regulation, regulations should be focused on the problems of minimised side effects and avoid a scattergun approach and enforcers should focus primarily on those whose activities give rise to the most serious risks.
I hope that I have done enough to persuade the noble Lord to withdraw his amendment.
I shall read in Hansard what the Minister said, but, as he said, there is not much between us on this. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 108 not moved.]
Clause 34 agreed to.
Clause 35 [“Regulator”]:
[Amendment No. 109 not moved.]
Clause 35 agreed to.
[Amendments Nos. 109A and 109B not moved.]
Schedule 5 [Designated regulators]:
moved Amendment No. 110:
110: Schedule 5, page 47, leave out line 8
The noble Lord said: This amendment is extremely short. It will remove the Civil Aviation Authority from Schedule 5. There is a very good reason why I want to do that—it was erroneously included in the schedule and should be removed. The CAA already has sufficient powers to ensure that it is able to discharge its statutory duties and therefore should not be included in the scope of the Bill. I beg to move.
On Question, amendment agreed to.
moved Amendment No. 110A:
110A: Schedule 5, page 47, line 18, at end insert—
“Gas and Electricity Markets Authority”
The noble Lord said: I know that much of the substance of my point is made in Amendment No. 111, tabled by the noble Lord, Lord Berkeley. Clearly, there is concern about why the regulators of the gas and electricity markets and water services should be excluded from the powers enshrined in the Bill and set out in the Macrory recommendations. It is a straightforward point. They have indicated that they do not wish to be included. No doubt the Minister will explain why that is the case. When something like that occurs and significant regulators are excluded, one inevitably asks why they are being excluded. Is there something wrong with the Bill, or is there something wrong with them? I would welcome the Minister’s comment on which of the two is right. I beg to move.
I found the six regulators in Amendment No. 111 in the list of major economic regulators. Like the noble Lord, Lord Razzall, I wondered why they had been omitted. I still find it slightly odd that the Civil Aviation Authority does not want to be included. It is interesting if regulators ask to be removed from the list and the Government say yes; it is very nice.
Then I looked at Schedule 5, which contains a list of regulators, and at Schedule 6, which contains the list of offences covered. It is a bit odd, because Schedule 6 lists Section 18 of the Energy Act 1976, but Ofgem is not on the list. I am not sure which of the regulators in Schedule 5 will take action under the Energy Act. Similarly, the Goods Vehicles (Licensing of Operators) Act 1995 and six road traffic Acts are listed, but I do not see any regulators for road traffic offences listed in Schedule 5. I do not know whether the Office of Rail Regulation would want to take action. Perhaps the noble Baroness who runs Natural England would want to, but perhaps not. I do not quite see the link between the two lists.
I believe that the Office of Rail Regulation would be happy to be on the list, as various pieces of rail legislation are mentioned, but it appears to be a bit haphazard and amateurish. Perhaps my noble friend can tell us about the principles that put regulators in, or not in, Schedule 5. Presumably, they have said which legislation they feel is appropriate to come under Schedule 6. If there is legislation in Schedule 6 but no regulator in Schedule 5, what is the point of it?
I apologise to the Committee for having 11 pages of amendments. I was so pleased with the noble Lords, Lord Berkeley and Lord Razzall, because I always thought that a regulator was something you used to control a steam engine. Then I though that the regulator had a job to regulate regulations or Acts of Parliament. As the noble Lord, Lord Bach, knows, I wanted to know which Acts of Parliament and which regulations a regulator should regulate, and how and when. I then asked which ministries were responsible for the activity of which regulations, which Bills, which Acts and so forth. The Government kindly told me that they did not know.
The last question that I asked the Government was: “Under which of these Acts in the schedule would a Minister have powers of entry?” The noble Lord, Lord West, replied: “None”. Of course a Minister does not himself have powers of entry, but he has the ability to give powers of entry.
I then took my earlier schedule, Schedule 4A in Amendment No. 109A, and did a comparison with Schedule 6 and with all the other regulations that the Government thought they had and knew. One of the reasons that I did not move my amendments was that I did not think it was fair on the Government to ask them to do something and to ask questions which they could not answer. The suggestion was therefore made that I should ask yet another—the 27th—Question for Written Answer, to ask which Acts of Parliament and which regulations give powers of entry or certain other powers to which ministry or government department. It is quite a difficult Question to table, but I am most grateful to the noble Lord.
Take something like water or electricity; the electricity supply industry is not quite sure, other than “Of...” this or “Of…” that, who regulates it. When it takes powers of entry by accident, because the secretary has typed the wrong postcode or pressed the wrong key on the QWERTY keyboard, it is not sure whether it has committed an offence. That happened fairly recently. It was in the press that an electricity body sent a letter to someone saying that it would like to introduce a new box, but it sent the letter to the wrong person. It insisted that the person should have a new box because the other one was dangerous, but it sent the engineer to the wrong house. He broke in and installed a new piece of equipment for someone who was not a client. In my view, an offence was committed in that case. I have many such examples.
I would like to know how these regulations work. I feel sure that the relevant regulatory authority should be imposed between the regulation and the people who have those powers. I am most grateful to the noble Lords, Lord Berkeley and Lord Razzall, for raising something that I had not even thought about.
Like the noble Lord, Lord Berkeley, I was interested in the match, or lack of it, between Schedule 5 and Schedule 6. I noticed that the Aviation and Maritime Security Act and the Aviation Security Act 1982 are still in Schedule 6, even though the Civil Aviation Authority has been taken out of Schedule 5. Clause 35 says that a regulator means somebody designated in Schedule 5 or somebody with powers relating to Schedule 6. It occurs to me that, although the Civil Aviation Authority is not in Schedule 5, it will still be involved in this because it is caught under Clause 35(1)(b), which states that,
“a person, other than a designated regulator”—
under Schedule 5—
“who has an enforcement function in relation to an offence”,
under Schedule 6—I paraphrase what it says. It seems to me that maybe the Civil Aviation Authority is still involved. That may also explain some of the other peculiarities between the two schedules.
Amendment No. 111A is in this group. It is a drafting amendment to ensure consistency within the Bill and that the sanctions it suggests will be in line with current legislation.
Many new pieces of legislation come from Europe and are enacted through the European Communities Act 1972. Provision is made in Clause 4(3) for relevant functions in Part 1 of the Act. Clause 22(1)(a) uses the same definition. However, no such consideration is given to the Part 3 sanctions available. Instead, a definitive list is provided in Schedule 6.
The European Communities Act, which is key legislation, is absent from the list. The list in Schedule 6 covers the Trade Descriptions Act 1968, which is vital legislation for protecting both consumers and business. That will be repealed and replaced when the Unfair Commercial Practices Directive is implemented by the Consumer Protection from Unfair Trading Regulations in April this year. Without provision in the Bill for such legislation, the sanctions will not apply to this new legislation, which is anticipated both in the UK and Europe as a step forward in providing the consumer protection regime that citizens deserve.
It may be that the amendment would have been better worded to amend Clause 36 to follow the same format as Clause 4:
“Page 15, after line 12, insert—
‘(c) includes any enactment made under Section 2(2) of the European Communities Act 1972’”.
The Bill team have indicated that they do not wish to include the European Communities Act in Schedule 6, as they believe that there is provision in the ECA to create an order to add the Part 3 powers from the Bill to the new legislation. If this is the case, and the Minister is not of a mind to accept the amendment, will he give a commitment to ensure that the necessary steps are taken to include provision for the Part 3 sanctions to be available for the Consumer Protection from Unfair Trading Regulations in April 2008?
Amendments Nos. 110A, 111 and 111ZA propose additions to Schedule 5. Prior to the Bill being introduced to Parliament, the Government carried out a full public consultation. As part of the process, we consulted national regulators on whether they wished to be included in the scope of the Bill. Ofgem, Ofwat and Postcomm all stated that they did not want to be included in the Bill as they already have sufficient civil and criminal powers to carry out their regulatory function.
On the Office of the PPP Arbiter, the sanctions under Part 3 may only be granted in relation to criminal offences. The Office of the PPP Arbiter does not enforce any criminal offences, and therefore the powers under Part 3 could not be made available to it. Finally, the Water Industry Commission for Scotland and the Northern Ireland Authority for Utility Regulation cannot be included under Part 3 as their functions concern devolved matters and are outside the scope of this Bill.
On Schedule 6, I refer noble Lords to the Explanatory Notes. I know that they have no more force that just being explanatory, but they say:
“The first group of regulators is those listed at Schedule 5 … For these regulators, ‘relevant offence’ … means an offence in an Act in relation to which the regulator has an enforcement function … such as investigating an incident of regulatory non-compliance”.
“The second group of regulators are those bodies with an enforcement function in relation to an offence contained in any enactment listed at Schedule 6. This group will largely consist of local authorities and Ministers. For these regulators, ‘relevant offence’ means an offence which is contained in the enactments listed at Schedule 6 in relation to which the regulator has an enforcement function. The enactments at Schedule 6 cover regulatory areas such as agriculture, animals, the environment, food safety, consumer protection, transport and health and safety … Orders under Part 3 only confer powers in relation to offences in existing Acts. Those are offences in existing Acts enforced by those regulators listed in Schedule 5; and offences in the enactments listed in Schedule 6. It is intended that, in future, Acts which create regulatory offences will themselves create whatever civil sanctions are necessary”.
My noble friend Lord Berkeley asked, “Why include an offence in Schedule 6 when there is no regulator?”. The offences in Schedule 6 are all enforced by some kind of regulatory body. Generally the offences in Schedule 6, as I have said, are enforced by local authorities, for example trading standards departments, and departmental regulators. The example that I have been given is the National Bee Unit, which I well recall from my Defra days. Are there any offences in Schedule 6 that are enforced by the Civil Aviation Authority? We do not think that there are, but there may be some safety offences that the CAA, together with other regulators, may enforce. We will look into that, and I will write to my noble friend one way or the other.
That takes me lastly, but not least, to Amendment No. 111A, which was spoken to by the noble Baroness, Lady Wilcox. I shall explain why the European Communities Act has not been included in either Schedule 6 or Schedule 7. The powers under Section 2(2) of the ECA are considered to be sufficiently wide—the noble Baroness made this point—to confer administrative penalties for criminal offences created under the ECA. We do not think that there is any need to use the powers in Part 3 of the Bill to create administrative penalties for those criminal offences. We do not think that it is necessary to list the Acts in Schedules 6 or 7. Having said that, we expect any new civil sanctions created under the ECA to follow the principles of the Macrory review and the model set out in Part 3.
When one looks at the comparisons of Acts and Bills, and one takes the Office of Gas and Electricity Markets, in Schedule 6 there is the Energy Act 1976, but not the Energy Act 1989 or the Energy Conservation Act 1981. Who decides which of these Acts are put in? Is this the interpretation given by the ministry, or who? I cannot understand the difference between them all.
Perhaps I could pose a supplementary question. The Minister kindly mentioned the Civil Aviation Authority wishing to be withdrawn from Schedule 5. If that is agreed, as I am sure the Committee will agree, that presumably means that there are no offences that the CAA would wish to enforce as the CAA rather than someone else enforcing them, which comes under Clause 35(1)(b),
“a person, other than a designated regulator”.
In other words, it is done by someone else, as my noble friend said. Are we in danger of something falling between two stools if an organisation’s name is not in Schedule 5 but there are things that these authorities and many others might have the power to enforce but do not?
I do not think that we are in danger of falling between two stools. In answer to both noble Lords, we have consulted all government departments and regulators about the offences for which they are responsible and which should be in the Bill. Human error is more than possible in long lists, and we are very grateful for the points that have been raised in this short debate. If there are any that should not be there for any reason, we will ensure that they do not remain there. A lot of work has gone into producing Schedule 5 and, in particular, Schedule 6. We think that they effectively speak for themselves.
I do not want to nitpick, but if the Government do not yet know which ministries have which powers for which Bills or Acts—as the noble Lord said yesterday, a major study is being undertaken which will be ready in the autumn—I have a problem when I look at the regulations and Acts in this Bill; they do not tie in with others for which I know certain ministries have responsibility. Is the schedule correct at present?
The noble Earl is quite right to return to this, because I did not cover it before. It depends whether the legislation sets up a criminal offence that is relevant to Part 3; in other words, if it talks about enforcing a regulatory offence, it will be in Part 3, but if the Act of Parliament does not do that, there is no reason for it to be in Part 3.
The noble Lord mentioned animals. There is a relationship between the Animal Health Act 2002 and the Animal Welfare Act 2006. Both create criminal offences, but one is on the schedule and the other is not.
I have to say that my knowledge does not compare to that of the noble Lord. I will of course have that looked into by my officials and we will write to him on whether he has a good point—or not, which is unlikely.
We have listened to what the Minister said, which seems to raise a point of principle, not just of detail. I understood him to say that when the department contemplated introducing the Bill, it had consultations with the public and various regulatory bodies. A number of them said that they did not want to be part of this procedure because they thought that they already had sufficient and adequate criminal and civil sanctions. Is that not missing a pretty fundamental point that there are other interests here—those of the consumer and, indeed, the Government, who are legislating on the basis that the Macrory review recommended that these powers should be given to regulators? Are we really saying that the Government simply sit there passively and say, “Well, the gas and electricity regulator does not want to take any notice of this, therefore we will not put it in the Bill”? That seems to ignore Macrory’s significant recommendations that the Government are asking us to implement—contrary to the wishes of the noble Lord, Lord Lyell.
The noble Lord raises a fair point, but we do not just have the consultation, hear what the national regulator says and not include it in the Bill if it does not fancy it. We consider carefully whether we deem its powers to be sufficient. If they were not sufficient, we would have impressed upon it that it should be included in Schedule 5. So thought was given to each of the comments made by the regulators and we think that we have it right.
Before the noble Lord, Lord Razzall, rises, perhaps I may say to the noble Lord, Lord Selsdon—I hope that I am not misusing this opportunity—were the two Acts he mentioned the Animal Health and Welfare Act 1984 and the Animal Welfare Act 2006?
I am sorry; it should have been the Animal Health Act 2002. There are lots of animals around these days.
The Minister has lifted a further veil on the Government’s position, because what we have been told hitherto was that the regulators had said that they did not want the powers, because they were sufficient already—and therefore that was it. If the Minister is saying that not he, but his officials, have looked in detail at what particular civil and criminal sanctions the regulators believe they have that are just as good if not better than the sanctions they would have under the Bill, it would be helpful for the Committee if the result of that work could be made available to us in written form before we debate this matter on Report. As I said, he has lifted the veil, we would like to see the—well, perhaps I had better not pursue the metaphor any further. He knows what I mean. On that basis, I am happy to withdraw the amendment.
Before the noble Lord does that, perhaps I may ask a question. The Housing Corporation is one of the designated regulators. That was another answer to my question that I received. It was surprising, because the Housing Corporation said that it did not prosecute at all and that the prosecutions in that area are done by the police. Now the corporation will be given the power to impose fixed and variable penalties. It may be difficult for the Minister to reply at the moment, but perhaps he would add that answer in his letter to us.
It was already going to be a long letter—it is now going to have an extra paragraph. I know that the noble Lord is keen to withdraw his amendment, or I hope that he is. By way of example, on the draft Bill Ofwat, Ofgem and Postcomm all stated that they did not wish to be included, as he knows. They are confident that their current mix of civil and criminal powers is sufficient to carry out their regulatory duties. Under their existing civil powers, Ofwat may impose enforcement orders or financial penalties up to 10 per cent of turnover and accept undertakings; Ofgem may impose enforcement orders or financial penalties, again up to 10 per cent, and a stop notice, too. I do not forget that the noble and learned Lord was quite positive about stop notices. Postcomm may impose enforcement orders and financial penalties, again up to the 10 per cent maximum. We heard what they had to say about that; we considered that it was satisfactory, which is why they do not appear in Schedule 5.
In that case, I do not quite understand why the water and gas Acts are in Schedules 6 and 7, which brings them back within the scope again, so these authorities will have the opportunity—if the relevant orders are used—to use these provisions for penalties.
The reason why they are there, I am advised, is because there may be other regulators that are in Schedule 5 or that may not be in that schedule because they are local authorities that have responsibility for offences created by those Acts. There may be joint or separate responsibility from those that declined to be in Schedule 5, but there may be more than one regulator that has to look after a particular enforcement from an Act of Parliament.
Before my noble friend sits down, it would be very helpful in this long letter that he is going to send us if he could give us one or two examples. We have talked about the Energy Act; bits of that Act do not require Ofgem to enforce, so who will enforce under Clause 18, as it is in Schedule 6? It would be very helpful if he could do that.
I am forced into the position—although I hope that I do not do so reluctantly—of saying that we will write a letter on this matter to the noble Lord, Lord Razzall, as it was his amendment that started this. However, I promise that it will not be a very long letter as it will not deal with every single case, although I hope that it will give some examples, especially the ones raised in Committee today.
That was the point that I was going to make. We do not really want the Minister’s officials to empty the full content of their brains on to paper. We should like a few examples to satisfy us that the Government have looked at the matter properly. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 111 to 111ZA not moved.]
Schedule 5, as amended, agreed to.
Schedule 6 [Enactments specified for the purposes of orders under Part 3]:
[Amendment No. 111A not moved.]
Schedule 6 agreed to.
Clause 36 agreed to.
Clause 37 [Fixed monetary penalties]:
moved Amendment No. 112:
112: Clause 37, page 15, line 24, leave out paragraph (b)
The noble Lord said: The amendment seeks to render understandable the amount of a fixed monetary penalty. Members of the Committee will be aware from other amendments that we and other noble Lords have tabled how much concern there is about, among other things, the quantification of the fixed penalty. In the Bill as drafted, a fixed monetary penalty can be either, as set out in subsection (3)(a), a prescribed amount, which, as the Minister may want to confirm, presumably means an amount defined in pounds sterling with increments at least determined by precedent and which is on the record, or it can be, as set out in subsection (3)(b),
“an amount calculable solely by reference to prescribed criteria”.
Our concern is that those criteria can change at any time and to anything so a fixed monetary penalty could be anything at all. I beg to move.
I shall speak to my Amendment No. 117 in this group. Currently, the Bill says,
“the amount of the fixed monetary penalty may not exceed the maximum amount of that fine”.
At present, I think that is normally at level 5. I suggest that it may not exceed half the maximum amount of the penalty. We hear a lot about proportionality and light touch, and these are fixed penalties. I see from the Regulatory Enforcement and Sanctions Bill that the example of a fixed monetary penalty given to work out costs and expenses is put at £1,000, which I suppose is in the minds of the ministerial team at the moment. It is very rare in a court for a maximum penalty to be given. A maximum penalty is not normally given unless the person has been a serial offender or the Act is very out of date and, for some reason, the available penalties have not been increased to take into account modern money values. That the fixed monetary penalty could be the maximum sounds like getting off to a disproportionate start and it may be more sensible to make it half, but I shall listen with care.
On Amendment No. 112, the Bill allows some flexibility in the calculation of fixed monetary penalties. The penalty must be either a prescribed amount or calculated solely by reference to prescribed criteria. Flexibility is necessary to ensure that the penalty is an effective deterrent. For example, the level of penalty could differ, as we have already said, according to whether the person liable is an individual or a large company. It could also ensure that small businesses are not disproportionately affected by fixed monetary penalties. The regulator, however, will have no discretion in setting the level of penalty. The Bill will require the method for calculating monetary penalties to be published in the penalty guidance, so there will be that level of transparency in the process.
On my Amendments Nos. 114 and 115, the Delegated Powers and Regulatory Reform Committee, in its report on the Bill, recommended that the level of fixed monetary penalties should not exceed the maximum amount payable if the offence had been tried summarily. In practice, we would expect fixed monetary penalties to be reserved for more minor instances of non-compliance but, in any event, the Government are happy to accept that recommendation, as I do in those amendments.
The noble and learned Lord’s Amendment No. 117 would cap the level of fixed monetary penalties at half the maximum amount of the fine that would be available in the courts. The Macrory review recommended that, as a general principle, penalties should seek to capture the financial benefit made from regulatory non-compliance. That has been one of the failings. Sometimes in quite well publicised cases, the penalty from the court has not meant anything other than that the company—the regulated body—has made quite a large profit out of its misbehaviour. Macrory wants to stop that, as I think we all do. Our fear would be—I suspect the noble and learned Lord anticipated this—that capping fixed mandatory penalties in the way proposed by this amendment would unnecessarily restrict a regulator’s ability to do that. We can imagine a case where, under this system, the restriction to a half would mean that some companies actually did rather well out of the fixed monetary penalty in some instances, so that is not the way to proceed. It might render fixed monetary penalties an ineffective alternative to criminal prosecution, where criminal prosecutions themselves have sometimes been unsatisfactory.
We entirely understand the concerns of the noble and learned Lord about the use of fixed monetary penalties. Of course, there are safeguards built into the process, but I am not going to go over that ground again; we have debated it at length today.
There will be considerable savings to business should a regulator choose to impose a fixed monetary penalty rather than pursue a criminal prosecution. In particular, business will not have to pay for legal representation before the courts, and the regulator will not be able to reclaim the costs of investigating the offence. That happens in the criminal courts, where a successful prosecuting regulator will inevitably ask for costs from the regulated person who has been convicted. That is my answer to the noble and learned Lord’s amendment.
To return to the noble Lord, Lord De Mauley, the criteria will be specified in the order made subject to the affirmative resolution procedure. Regulators will not be able to vary the criteria to be employed without a further order.
I am most grateful to the Minister, but must confess that I am currently quite confused. I had thought that the idea of taking into account what a business has saved or extra profit it has made, or anything of that nature, was to be covered by variable monetary penalties. I see the Minister saying that that is not the case, but what is the difference between fixed and variable monetary penalties if a fixed monetary penalty can take into account the individual circumstances of the offender?
I am hypothesising, but I thought failing to get a licence for a short period would get a fixed monetary penalty; perhaps if it was for a long period, it would get a variable monetary penalty. If the regulator goes for a fixed monetary penalty which is prescribed by general criteria, however, I have not understood that to mean that one of the prescribed criteria should be whether you have made a profit by your wrongdoing, how long you have been carrying it out and so on, which is very individual and the kind of thing that gets argued about in courts. This figure is to be determined by a quite junior official, as I understand it, before it is even sent out. It is not particularly a matter of negotiation—or, if it is, it is not a statutory requirement that there be any negotiation. I will not go on, but I think the Minister is slightly driving a cart and horses through my understanding of the Bill.
I hope that I am not, but I take the noble and learned Lord’s point. For example, a minor breach of a licence—having forgotten to put it in in time—might well be a prescribed amount whether it is for a massive multinational undertaking or a small business. However, there will also be carefully prepared criteria so that the regulator—and the noble and learned Lord is concerned about what they may do—will have to look at the criteria set down in order, decide which apply to this case and which do not, and then make his decision about the amount due on the basis solely of the criteria. We do not have the criteria before us, which is a disadvantage. They will come much later. If he has not dealt with the criteria in an appropriate way, there will be a remedy for business; first, it can ask the regulator to look again, and in practice that will be a different regulator, more senior than the one who took the decision, and if that is not satisfactory, it will be able to go to an independent tribunal.
Is it a summary of the Minister’s reply to say that a fixed monetary penalty can vary?
It will not be £20 in every case. If it is not £20 in every case, the answer to the noble Lord’s question is that it can vary. That is what the criteria will be there to establish. I see that the noble Viscount is about to enter the fray.
Not on that, but did I hear the noble Lord, Lord Bach, right, when he said that if you go down the monetary penalty route, whatever that may be, there is no provision for the regulator to recover costs? If so, it does not accord with Clause 51.
Let me find Clause 51. As I understand it, Clause 51 does not apply to the fixed monetary penalty; it applies to the discretionary sanctions, because it is not supposed to cover the fixed monetary penalty sanction. The other sanctions are covered by it.
I simply do not understand it. We are dealing with the part of the Bill that starts with Clause 40 on discretionary requirements. Among those are the monetary penalties. I do not understand why, in that case, Clause 51 does not include the process whereby you lead up to imposing a monetary penalty, and if that is right, why should it be right? The regulator has had to incur costs to get to that stage, as he would have done had he gone to the courts. Why should he not be able to recover them? It seems ridiculous that he should not be able to do so.
Clause 51 begins, “Provision under section 40”, which is where discretionary requirements appear in the Bill. By that stage, we have dealt with fixed monetary penalties, which are not what we describe as a discretionary requirement, so it does not apply to fixed monetary penalties. One of the considerations that will have to be made by the regulator in deciding what course to take is his realisation that if he goes down the fixed monetary penalty route he will not be able to recover costs.
The noble Lord cannot be right. Clause 40(3) states:
“For the purposes of this Part”—
which includes this and Clause 51—
“a ‘discretionary requirement’ means … a monetary penalty”,
among other things. Why is it not covered by Clause 51?
That is the variable monetary penalty. No one has suggested that a fixed monetary penalty is a discretionary requirement, but a variable monetary penalty is certainly a discretionary sanction. So I maintain—if I am wrong we will know very soon—that cost recovery does not apply in Clause 51 to what we are discussing in Clauses 37 to 39.
From what the Minister says, unless the guidance to be given under the prescribed criteria is rather limited or arbitrary, which I am sure it is not, it sounds as though the prescribed criteria will say that you should take into account the following factors—I am making these up and there could probably be many more: whether the offender made a profit; whether it was done deliberately; the size of the business; the personal circumstances of the offender, such as illness or suffering some mishap; or whether it arose from a misunderstanding. One could go on. These are all things that a court would consider in seeking to provide a just result within the ambit of the maximum penalty. If junior officials will be required to do that as a result of prescribed criteria, would it not be a lot better to leave it to a court?
We have been over why we think that it is better for good regulation to follow the Macrory principles. The kinds of criteria we consider are the size of business, which might well be in the criteria; a delay in submitting records; and the number of instances of non-compliance, such as the number of accounts that have been filed late. We do not think that criteria based on assessing financial gain are likely to be appropriate for fixed monetary penalties. If I gave that impression in what I said earlier, I was wrong. Variable monetary penalties would clearly be far more appropriate.
I understand the noble and learned Lord’s point, but the criteria set out will be pretty exact. If the regulator, junior or senior, does not follow them in deciding what the fixed monetary penalty should be, I repeat that he can be appealed against.
I am grateful to the Minister for battling through this rather complicated area. In passing, the confusion caused by this group of amendments does not bode well for the ability of businesses—small, medium and large—to understand it. It does little to satisfy our concerns.
The Minister says that the criteria will be set down by order. He unfortunately went on to say that that will come much later. He has given us some idea, but if we could see a draft of the order itself, it might help my noble and learned friend and me considerably. We will come back to this whole area later. On that basis I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 113:
113: Clause 37, page 15, line 25, leave out “Where the relevant offence” and insert “A relevant offence must be one that”
The noble Lord said: The purpose of Amendments Nos. 113 and 116 is to ensure that the fixed penalty procedure should be used only for relatively minor offences which, for the sake of argument, would otherwise be subject to the procedure of summary trial. It is not appropriate to use the fixed penalty procedure if an offence would otherwise be eligible for trial by jury. In such cases, things are much more complex—too complex, we feel, to be dealt with by a simple fixed penalty. This is, at this stage, a probing amendment. The enthusiasm with which we pursue it might be affected by what the Minster envisages as the maximum amount of such a fixed penalty. I beg to move.
I wonder if this is an appropriate place to seek some clarification. Are we also talking about individual members of the public under this fixed-penalty regime? For example, if you have a surplus fridge which you want to dispose of and someone comes to collect it, the householder has to ensure that the person who takes the fridge away is licensed to do so and will dispose of it under that licence in a proper manner. Other regulations relate to compost heaps, I think, and the disposal of waste in various ways.
The reaction of members of the public to a system of fixed penalties concerns me. For example, if your tax return is late, the penalty is £100. It does not matter whether that tax return means that you owe money to the Inland Revenue or it owes you money or even that you thought that you did not have to make a return on that occasion. The penalty is £100. The public are willing, in a rather gloomy sense, to accept rough justice. The penalty is £60 if you are caught on camera going through a red light, or whatever. This discussion seems to be leading us into a much more difficult area of criteria and of varying possibilities under those criteria. It would be wise if the Government assessed the reaction of the public to different approaches to the criteria that may be used for fixed penalties.
Noble Lords will see that my name is added to the amendment of the noble Lord, Lord De Mauley. He has put succinctly the point that the amendment is an attempt to limit the powers to minor offences. It is a straightforward point. Do the Government accept that or not?
Amendments Nos. 113 and 116 are similar in nature to the government amendments that I have spoken to—Amendments Nos. 114 and 115—but go a step further and would prevent regulators from using fixed monetary penalties for either-way and other offences. While of course in the vast majority of cases we would normally expect regulators to impose fixed monetary penalties for more minor instances of non-compliance, there may be—I repeat, may be—instances where a regulator might wish to impose a fixed monetary penalty in respect of an either-way offence. The amendments would remove that flexibility from the Bill.
Could the Minister give us a couple of examples?
There are many either-way offences on the statute book. It might be that one of those offences may not be of a particularly serious nature, but it remains an either-way offence. Do we really want to exclude completely the possibility whereby any either-way offence could not be dealt with by a fixed monetary penalty? The business might well be delighted to have a fixed monetary penalty for an either-way offence rather than anything else. We do not think that we should remove that flexibility from the Bill. That is our case.
I shall deal with the timely point made by the noble Viscount, Lord Eccles. That was a reminder to us all as far as Her Majesty’s Revenue and Customs are concerned. These sanctions are aimed at businesses—including sole traders, of course—whether they are large, small or medium-sized, as someone said the other day. I hope that, for the moment at least, that answers the noble Viscount’s point.
The Minister was talking about some very minor offences. I thought that we lived in a world in which somebody had to commit such offences at least more than once before you could prosecute it at all. Will we find that these young officials are saying, “We have an example of a minor offence and we’ve been told that we have to prosecute and up our game in the number of convictions we can get”—and hey-ho, they prosecute? Is that what is going to happen? How is that going to be covered? It would not be fair.
If they went for a fixed monetary penalty, which is what we are saying should happen, and if they felt that was appropriate in this case, they would not prosecute and there would be no conviction. If they were restricted by this amendment in a case that was either way from imposing a fixed monetary penalty, prosecution might well be a more likely end product. A fixed monetary penalty might well be an act of mercy by the regulator, rather than the opposite. By the argument that the noble and learned Lord has just employed, he is really supporting my opposition to reducing the flexibility that the regulator will have.
I do not want to go on with this too long, but I was really picking up what the Minister was saying about the whole criteria rather than the technical details of the amendment. I have been worried ever since I looked at this business of questions of penalty and levelling being dealt with by young officials under attempted efforts in statutory instruments to give detailed criteria as to how you do justice in all cases, when you cannot really temper them to the individual case. As I emphasised in my long speech before, it is an essential part of the whole prosecuting system that there has not only got to be evidence of guilt but it has to be in the public interest to prosecute. If all minor cases were prosecuted, there would be a revolution. People would just be fed up with having officials on their backs. That is a worry to me, and I hope that the Minister will persuade us that this is not in the Government’s mind—although I do not ask for a long answer now. I do not think that it is in the Government’s mind, but we might get to a position where it happened.
It certainly is not in our mind. Indeed, the whole argument about this is that there will not be prosecutions and criminal convictions as a result.
I am using the word prosecution to mean penalties. Perhaps I should start to call them administrative penalties. It would get down people’s throats if they were getting administrative penalties all the time.
I understand. It will be very important that local authorities, the regulators in this field, do not abuse their position, and we shall be watching very closely to ensure that they do not. You can be quite sure that the businesses will be watching very closely, along with their representatives. In most cases now, as the noble and learned Lord is saying, regulators use their discretion and good sense to know when to prosecute and when not to. There is no reason to believe that they will not do the same when one of the sanctions available is a fixed monetary penalty.
One of Macrory’s points was that the only alternative to prosecuting someone through the courts, with all the costs involved for the person being prosecuted in a minor case, was to do nothing about it at all, and sometimes that would be the wrong thing to do. It calls for the regulator’s good judgment. You cannot always rely on that, which is why the safeguards that we have referred to many times this afternoon are in place. I am advised that regulators will have to act in compliance with principles of good regulation in a targeted and proportionate way; if they do not, they will be subject to very severe criticism.
Can I pursue the redundant fridge for a moment? Am I right to understand that the clause and the Bill do not cover the circumstances in which that ends up being fly-tipped by a person? We keep coming back to the question of a business, but I thought that the word “person” included individuals as well as businesses. Penalties are set out. Am I wrong to think that the Bill has an effect on the way in which those penalties may be fixed and handled? Or is it that they can be included under these clauses?
Let me be candid with the noble Viscount, who has introduced a very important point. I do not know the answer to it, and it is important that we should. We will make sure that a letter comes to him explaining the position as we see it before our next day in Committee, which is next Wednesday. I do not want to guess at an answer that may prove to be wrong. It is a pertinent point.
Let me reinforce my earlier point. Among the public there is a willingness to accept that it may be that for some things that they do that are wrong, such as going through a red traffic light, it is more practical to pay the £60 than to go to the magistrates’ court. At that point, you have two belief systems in opposition to each other. There is a belief system that says, “On the whole, I would really rather go to a court and rely on the court for justice”, and there is the other system, which is utilitarian, and it says, “Life is too hectic. I want to move on; I will pay the £60 and forget all about it”. Those are in opposition, and the Bill straddles those two belief systems. It says, “Up to a certain point, I hope you will accept summary justice applied by officials making decisions and saying, ‘Would you like to settle this for £1,500 or not?’”. A line is drawn somewhere with the criteria and the amount of money. The utilitarian school will cease to want to be utilitarian and it will say, “I would rather go to the court”. That boundary between the application of economics and the wish to have justice in a much more worked-out way is the difficulty that I have with this whole part of the Bill.
Surely the boundary would be a different amount of money for different people and different offences. You cannot lay that down in statute. Yes, the noble Viscount is right that there is a boundary, but that would be a behavioural judgment either by the person who is being given the monetary penalty or not, and that is not something that you can write down beforehand.
I entirely agree with the noble Lord, and certainly my boundary is set at a much lower figure than that of some other people. That is the way that it is. That brings you into all sorts of issues about who is advantaged and who is not so advantaged, and that has a tremendous impact on public opinion and their feeling on whether justice is being achieved.
I thank the Minister for his answer and I thank all other noble Lords who have taken part in the debate. By now the Minister is well aware of the various concerns that have been raised. We will also benefit from the debates on some of the forthcoming amendments, which go to some parts of this point. Before we decide how to proceed on this group, I will withdraw the amendment, but I reserve the right to come back to it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendments Nos. 114 and 115:
114: Clause 37, page 15, line 26, leave out “only” and insert “(whether or not it is also triable on indictment)”
115: Clause 37, page 15, line 27, at beginning insert “on summary conviction”
On Question, amendments agreed to.
[Amendments Nos. 116 and 117 not moved.]
Clause 37, as amended, agreed to.
Clause 38 [Fixed monetary penalties: procedure]:
moved Amendment No. 118:
118: Clause 38, page 15, line 32, leave out from “(2)” to end of line 33
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 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,
“procedural propriety generally requires that a person charged with an offence, or against whom administrative action is proposed to be taken, should be told the case against him”—
“and be afforded an opportunity to make representations”.
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:
“We are unconvinced that this [arrangement] meets the minimum standards of procedural fairness an accused person ought to have in relation to what are ostensibly criminal offences. The bill as currently drafted risks excluding a basic common law principle of natural justice: audi alteram partem (hear both sides before making a decision)”.
In his letter to me, as chairman of your Lordships’ Select Committee, the noble Lord, Lord Jones of Birmingham, said:
“As the Guide to the Bill (which we published last month) makes clear, fixed monetary penalties are aimed at low level non-compliance. It is envisaged, for example, that notices will be used for ‘strict liability’ offences, that is, cases where liability is satisfied simply by a person committing a particular act; the prosecution does not have to show an intention to act, or any blameworthy conduct … fixed monetary penalties are not intended to be used for more serious or more complex instances of non-compliance”.
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:
“In practice, we would also expect regulators to have been in communication with those they regulate before proposing to impose a sanction. Against this background, although there is no specific procedure in the Bill under which a person would make representations or objections before a fixed monetary penalty or stop notice is imposed, this may in practice occur”.
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.
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 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.
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:
“To comply with this subsection the notice of intent must include information”.
Then under subsection (5) it says:
“Provision under subsection (2)(c) may also include provision for”,
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 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,
“may include provision for any other circumstances in which the regulator may not decide to impose a discretionary requirement”.
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.
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.
I, too, support the amendment. The words,
“the grounds for imposing the monetary penalty”
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?
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.
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. 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 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.
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?
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 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.
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?
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).
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.]
moved Amendment No. 120:
120: Clause 38, page 15, line 34, leave out from “results” to end of line 2 on page 16 and insert “shall secure that a person has an opportunity to make written and oral representations to an independent judicial person appointed by the Secretary of State or the Welsh Ministers, as the case may be, before being required to pay the monetary penalty.”
The noble Lord said: This amendment is probably not very well drafted, but I hope that the idea behind it will have been conveyed to the Minister, his officials and other noble Lords. There are already provisions that if a fixed monetary penalty is to be imposed, you can appeal against it and there is an internal review. My amendment seeks to replace the internal review with an independent review by what I describe as,
“an independent judicial person appointed by the Secretary of State or Welsh Ministers, as the case may be”.
That person would be a kind of ombudsman who could review the monetary penalty in the first instance, rather than it being reviewed simply by one of the colleagues of the person who imposed the penalty in the first place. I beg to move.
I point out to the Committee that if this amendment is agreed to, I shall not call Amendments Nos. 121 to 131 for reason of pre-emption.
That makes it tempting in itself, but I will resist. We believe that fixed monetary penalties would be unworkable if the approach proposed in the amendment were to be adopted. As we have just discussed, we do not think that it is appropriate to add a “notice of intent” stage to the process for imposing fixed monetary penalties, and I will not go over that again.
On the specific proposal that representations should be heard by an independent judicial person prior to a notice being imposed, we think that this is unnecessary and undesirable. Although this is in a sense a probing amendment, it is not clear from the amendment who this independent judicial person would be or what powers they would have, but presumably they would be akin to a tribunal. If the amendment were accepted, further provision would need to be made for this judicial body in the Bill, thereby increasing the complexity and bureaucracy of the process of imposing what we want to be a quick and simple sanction; of course, with safeguards. The amendment would also, in effect, give a business that had clearly breached the regulations two rights of appeal against a sanction, both before and after its imposition, possibly to two different bodies. That would be disproportionate and would raise costs, particularly for businesses.
The internal review stage—the first appeal—proposed by the Bill would, by contrast, be a less costly and much more accessible way for a business to make representations and raise defences. We understand the Committee’s concerns about the process for regulators determining a business’s liability to fixed monetary penalties. That is why the safeguards are there, particularly the right of appeal which, although it is at a later stage of proceedings, surely goes quite long way to satisfy the noble Lord. Review by such a tribunal will mean that regulators ought to ensure that their decisions will meet the requisite legal requirements and standards of procedural fairness. If there was to be this right of appeal, we are pretty sure that regulators would simply choose not to take up the new sanctions and would rely on criminal prosecution instead. While that might please the noble and learned Lord, Lord Lyell, it would not please the many organisations that supported what Professor Macrory has suggested.
Amendment No. 120 would allow a business to make oral as well as written representations and objections against a sanction being imposed. This point is covered by Amendment No. 128 which, the brief says, we will come to shortly.
The Bill is trying to simplify procedure and speed matters up. These amendments are trying to get back to the situation where everything is delayed. You cannot ask for red tape to be cut and then put in procedures that do not allow red tape to be cut. That is a contradiction in the noble Lord’s position.
I got nervous when the Minister talked about quick sanctions that could be slammed on by a junior official, with the only appeal being to that official’s boss. The noble Lord, Lord Desai, makes me more nervous when he says that it is all about quick sanctions. On the other hand, I found the Minister much more persuasive when he explained about the additional bureaucracy involved in having an external review as opposed to an internal review. Without saying that I am 100 per cent persuaded, I find that interesting. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 38 [Guidance about quality contracts schemes]:
moved Amendment No. 121:
121: Clause 38, page 15, line 35, leave out “requiring” and insert “of intent to require”
The noble Lord said: My amendments in this group are very similar in effect to those tabled by my noble friend Lord Goodlad, which we have just debated at some length, so I shall, I hope, please Members of the Committee by not arguing the case in full. A major basis for the Minister rejecting my noble friend’s amendment was that it would add complexity, and I suspect his criticisms of this series of amendments will be identical. Our view of whether that complexity would be worth while is critically dependent on the earlier question we discussed about a better understanding of the quantum of fixed penalties, so I urge the Minister to think carefully about how far he can go towards producing those important criteria that he earlier said would be laid down by order. I move this amendment only to allow him an opportunity to comment on that. I beg to move.
As the noble Lord fairly said when moving this amendment, we have been here before, and I am going to be very short in responding. We believe that a “notice of intent” stage for fixed monetary penalties would undermine the usefulness of the sanction and would add a layer of complexity disproportionate to the types of non-compliance that these penalties are designed to address.
As I understand it, Amendment No. 128 is in this group. The noble Lord has not had a chance to speak to it. Will he make the same point that he made in his opening remarks about what he wants me to answer on in particular in relation to Amendment No. 121? I did not catch it.
Amendment No. 128 is there, and my noble friend does not want to intervene.
Is the Minister asking purely about the issue of oral and written representations raised by Amendment No. 128?
That is Amendment No. 128, but when the noble Lord moved Amendment No. 121, my concentration slipped for a moment, and I did not catch the new point he was raising and wanted me to reply to.
I am very grateful to the Minister. I was not raising a new point; all I was saying was that our view of whether the element of complexity, which the Minister criticises, that would be introduced by this group of amendments would be worth while depends on the quantum of the fixed penalty. The Minister explained earlier that the criteria would be laid down by order. Those criteria are becoming much more important to us as this debate goes on. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 122:
122: Clause 38, page 15, line 36, at end insert—
“( ) where the person on whom the notice is to be served has registered a primary authority, that notice must be served through the primary authority on such person as shall be registered with the primary authority as competent to receive such notices,”
The noble Lord said: This amendment ensures that, in the case of a multi-site business, any notice is served on the right, sufficiently senior person. For example, a local manager should not be able to get away with paying a penalty in order to keep his own lapse of compliance secret from his bosses. The amendment would ensure that the company was served with the penalty, at least where it had registered a primary authority. I beg to move.
I thank the noble Lord for raising the issue. I understand the concern he raises that multi-site businesses have about the service of enforcement notices. It would not be appropriate for either the enforcing authority or the business for all fixed monetary penalties across the country to only be served by a primary authority and only on a designated person within a company.
For an enforcing authority, this would mean that should it wish to serve a notice on an outlet in Cornwall, for example, the authority would have to send the notice to the primary authority for it to be served on a designated person within the company’s headquarters, which could be at the opposite end of the country. That would lead to unnecessary delays in dealing with the problem. It would also add a further layer of complexity and bureaucracy to the process for enforcing authorities, without delivering any real benefit to them. As for businesses, it would be inappropriate for the Bill to determine how their internal management systems should be structured.
The policy aim behind the amendment, which the noble Lord explained, might be better achieved administratively through the primary authority notifying the business whenever a sanction is imposed. The Local Better Regulation Office will hold a database of primary authority partnerships, including a contact point for each business that has a partnership agreement. It might well be possible to use this to achieve the aim behind the amendment. I know that officials from the Better Regulation Executive are happy to explore with their LBRO colleagues how this might work in practice. These are operational issues and do not need to be set out in the Bill. I hope that that goes some way to satisfying the noble Lord’s proper policy issue.
I am very grateful to the Minister. What he suggests sounds like a very sensible compromise. In what form would that requirement be promulgated?
To which requirement does the noble Lord refer?
The requirement for the sanction to be notified through the primary authority to the head office. I think the Minister referred to that.
That would be done through holding a database of primary authority partnerships, including a contact point for each business that has a partnership agreement. The primary authority will know where to go because the LBRO has a database that will assist it to get to the business whenever a sanction is imposed.
I am sorry to labour the point. The Minister has explained the mechanics. What he has not explained to me is where the requirement will be in regulatory terms. Will it be by order? I think that he is saying that it will not be in the Bill.
As I understand it, on this occasion it would be part of the system that would be administratively sorted out between the various groups, the LBRO and the primary authority. I do not believe that it would require an order, but this is how it would actually work in practice: it would be an administrative arrangement between these organisations.
I am grateful to the Minister. We have gone far enough with this, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 123 and 124 not moved.]
moved Amendment No. 125:
125: Clause 38, page 15, line 38, after “notice”)” insert “within 28 days”
The noble Lord said: This is a simple amendment. When somebody is about to be fined or given a fixed penalty, or, for that matter, a discretionary penalty, they are allowed to object and to seek an internal review. The Bill is not clear on how long they have to object. Once they have objected, the regulator has 28 days to explain his side of the case for a fixed or a discretionary penalty. It is not clear how long the regulatee—whatever the word is—has. It would be helpful to be told at least how long the Government have in mind and whether they should put it in the Bill. Certainly it seems to me that the person being regulated will need to be told how long he has to appeal. I beg to move.
I thank the noble Lord for his efforts in attempting to ensure the right balance is struck between providing a fair period for a business to contest the imposition of a sanction, while ensuring the process is not unduly long. In the case of fixed monetary penalties, we believe that 28 days would normally provide adequate time for a business to request an internal review of the decision to impose the penalty, so we are sympathetic to the amendment. We would like him to withdraw it in the normal way today, and we will consider what he has said about it.
On Amendment No. 140, dealing with discretionary requirements, we are more concerned that 28 days may not always prove sufficient time for a period of representations and objections to run its course. In particularly complex cases there may be more than one party to the case and objections and representations may need to be shared among them. There may also be third parties that are affected by the non-compliance and the business may wish to offer undertakings to such persons under Clause 41(5), so we feel that a limit of 28 days may prove too restrictive. That is why we are less happy with this proposal. To be fair, we would like to consider what he has said and perhaps we can discuss this matter at a later stage.
That is extremely helpful of the Minister in both cases. I am not sure I quite understand the reason for the distinction between the two cases. My main point is that the person who is about to pay the penalty needs to know how long he has to require a review. The Minister has been extremely helpful in general terms. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 126:
126: Clause 38, page 15, line 38, after “to” insert “request an independent person appointed in accordance with provisions which shall be laid down in an order made under section 34(1) to”
The noble Lord said: I shall speak also to Amendments Nos. 129, 130 and 131. The procedures for the imposition of neither fixed nor variable penalties appear to allow an accused person to hear the evidence, to cross-question the enforcer, or to make representations on the basis of the evidence. More than that, the initial representations by the accused are considered only by the same regulator that imposed the penalty in the first place—the oft-repeated concern that the regulator becomes policeman, judge and jury, which would be wholly inequitable in terms of due process. This amendment—I am happy to admit that there may be a better way of achieving it—would mitigate an element of that situation by at least requiring the initial representations to be heard by an independent person. I beg to move.
This amendment is very similar in many ways to that which we have just discussed in the name of the noble Lord, Lord Cope. From these amendments, it is not clear who the independent person would be or what powers he would have. Unlike the amendment of the noble Lord, Lord Cope, on this issue, which specifies that the independent person should be judicial, these amendments simply require the person to be independent.
On fixed monetary penalties, we have sympathy with the spirit of the amendments tabled. As the guide makes clear—of course, I make all the provisos about the guide—we recommend that the person or persons conducting the internal review should not have been involved with the original decision to issue the notice. The reviewer should work or have worked in the relevant area of regulation and, where possible, should be more senior and experienced than the person imposing the notice. However, we still believe that the review should be internal and heard by the regulator. Our concern is that if these amendments were accepted, further provision would need to be made for this in the Bill and that would increase the complexity and bureaucracy of the process of imposing the sanction. We think this is not necessary for the same reasons that I argued when the noble Lord, Lord Cope, moved his amendments.
I thank the Minister for his response. He has given me some food for thought, particularly as to the identity of the independent person. I shall perhaps consider the matter in conjunction with my noble friend Lord Cope and we shall see if we want to bring something back at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 127 to 131 not moved.]
moved Amendment No. 132:
132: Clause 38, page 16, line 5, at end insert “and all relevant facts and matters relied upon to establish such grounds”
The noble and learned Lord said: I can speak briefly as a result of what I took to be a helpful explanation from the Minister on the question of what “grounds” really means. At four different points in relation to the various amendments, when it says that the,
“fixed penalty notice must include information as to… the grounds for imposing the penalty”,
it should go on to read,
“and all relevant facts and matters relied upon to establish such grounds”.
The Minister seemed to be saying when we discussed the amendment proposed by the noble Lord, Lord Goodlad, and I raised this question of grounds, that he had in mind that that is what the grounds should do. They should not just be a bare statement that you have failed to purchase a licence, or something like that; they should include all facts and matters which were relevant.
On the question of the amount of the penalty, dealt with in the second amendment, Amendment No. 133, I have asked that it should say,
“the amount of the penalty and (if appropriate) how it was calculated”,
and the reasons,
“why such amount was chosen.”
That will be highly relevant to the question that took me aback—that under fixed monetary penalties the words, “reference to prescribed criteria”, were actually quite complex and included such matters as whether you had made a profit; whether, although it might be an absolute offence, there had nevertheless been an element of intent; how big the business is; the circumstances of the offender, including their health; and the possibility of a misunderstanding or some other innocent reason.
It will be important to the person receiving the fixed penalty notice to understand what has been taken into account so that, when they ask for the internal review, they can focus their minds on the right issues. I shall wait to see what the Minister says, but that is the reason for the amendment. I beg to move.
I am pleased that the noble and learned Lord was content with what I said about grounds. Let me just say it again. There will be a summary of the evidence; it is obviously not going to be full, but it will be more than just what would be on the charge sheet, if this were a criminal proceeding. I think that deals with three of the noble and learned Lord’s amendments. On Amendment No. 133 and the wording of Clause 38(3)(b), where it says that a,
“fixed penalty notice must include information as to… the amount of the penalty and (if appropriate) how it was calculated”,
we think that that is probably enough. A regulator will have no discretion in determining the level of fixed monetary penalties. The penalty will be set at either a prescribed amount or the amount will be based on prescribed criteria. This will have been predetermined in the regulator’s penalty guidance, which the regulator will have had to publish by virtue of Clause 61, if that becomes part of the Bill. So we do not think on balance that it is necessary for there to be the extra words that the noble and learned Lord seeks in his probing amendment to put in the Bill.
I thank the Minister for that answer. There is still some residual worry. I find it difficult to spot how these prescribed criteria, which are obviously reasonably complex in order to attempt to be sensitive, will work in practice, and how they will vary in the exercise of the discretion. For example, if you decide to reduce the penalty because it happens to be an individual, and that individual is now ill, that needs to be explained. One needs to know whether that has been taken into account before the individual, or those assisting him, decides to accept it.
There is a bit of a grey area. I have made my point for the moment. I am sure the Minister will reflect on it. For the time being, pending further stages, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 133 not moved.]
Clause 38 agreed to.
Clause 39 [Fixed monetary penalties: criminal conviction]:
moved Amendment No. 134:
134: Clause 39, page 16, line 32, leave out from second “a” to end of line 35 and insert “person is given a notice offering him the opportunity of discharging any liability to conviction for that offence by payment of a fixed penalty—
(a) no proceedings shall be instituted for that offence before the expiration of the period specified in the notice pursuant to section 38(3)(d) following the date of the notice; and(b) he shall not be convicted of that offence if he pays the fixed penalty before the expiration of that period.”
The noble Lord said: This is a probing amendment as to the Government’s intentions, and as to whether the drafting is quite right. I am grateful to the Trading Standards Institute, which has drawn to a number of your Lordships’ attention a possible weakness in this clause. It is quite obvious that Clause 39 intends to say that there cannot be an element of double jeopardy and that if the fixed penalty is imposed on somebody they cannot then be convicted of a criminal offence in relation to the same action or omission. That is clearly the intention of Clause 39.
It is suggested that we should amend Clause 39 as set out in Amendment No. 134 that stands in my name and that of my noble friend Lady Hamwee and the noble Baroness, Lady Wilcox. It would bring the legislation into line with other legislation with respect to fixed penalty notices, thus allowing the regulated person to accept the fixed monetary penalty to discharge their liability for future action through the payment of the penalty within the period set. The suggestion is that if that is not put in the enforcing authority could proceed to impose an alternative sanction on the regulated person and not fall foul of the double jeopardy argument. The draftsman may not think that this is necessary. For that reason it is a probing amendment, and it is really a drafting amendment. I beg to move.
We of course support Amendment No. 134. We also support Amendments Nos. 144 and 154. Amendment No. 151 would do much the same thing, in that it would enable a business in receipt of a notice of intent to opt instead for a court action, thereby ensuring that the court option would not only be available at the desire of the regulator, but also of the accused. It would therefore act as a brake on any regulator who tried to use the civil sanction procedure as an easy option to cut corners in determining whether an offence has been committed and in collecting the appropriate evidence. The prospect of a criminal conviction would act as a deterrent against a situation where a business used this route deliberately to bog down the system. In other words, other than where it had good reason to believe it would succeed.
Turning first to Amendments Nos. 134, 144 and 151, we understand the concerns that noble Lords have expressed about the new sanctioning powers being misused. There are of course the important safeguards I have spoken about this afternoon. First, there is a need for regulators to be satisfied beyond reasonable doubt before they can impose a fixed monetary penalty or discretionary requirement. Secondly, for both of these sanctions there will be an opportunity for the business to make representations to the regulator. Thirdly, and perhaps most importantly, the imposition of these sanctions will be subject to the scrutiny of an independent tribunal. While these safeguards will apply in individual cases, there are broader safeguards in the form of the review and suspension provisions that we will come to in Clauses 63 and 64. These will help to address any systemic failings by a regulator.
The powers in Part 3 are an alternative to criminal prosecution, but it is for the regulator to determine which route is more appropriate. This is a fundamental component of the Macrory model of regulatory enforcement. Enabling a business to decide how it will be punished could leave the system open to abuse. A business, for example, could wait until a late stage in the civil sanctions process before opting for a criminal prosecution in an effort to delay the enforcement process. Allowing businesses to choose to go down the route of criminal prosecution would also go against another of the fundamental tenets of Macrory: that criminal prosecution should be reserved for the most serious and egregious offences. That can only be assessed by the regulator in view of all of the cases before it.
Amendment No. 154 would go a step further and allow a business to opt for a criminal prosecution where a regulator has already imposed a stop notice. Stop notices will only be imposed in strictly controlled circumstances. In particular, there must be a significant risk of serious harm to human health, the environment or the financial interests of the consumers before a notice can be imposed. In light of the sorts of behaviour that these notices are designed to tackle, it would be inappropriate for a business to be able to opt instead for a prosecution, while the serious harm specified in the stop notice materialises.
That expresses the Government’s view. We are very grateful, as always, to the trading standards organisation, which has been very helpful throughout the Bill.
The amendment to Clause 39 is of a slightly different nature to the other two amendments that the noble Lord, Lord De Mauley, and I were speaking to. Perhaps the Minister’s officials could have a look at the wording proposed by the Trading Standards Institute to see whether it covers a necessary point. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 39 agreed to.
The Committee stands adjourned until Wednesday 6 February at 3.45 pm.
The Committee adjourned at 7.23 pm.