Wednesday, 6 February 2008.
The Committee met at quarter to four.
[The Deputy Chairman of Committees (Lord Colwyn) in the Chair.]
Regulatory Enforcement and Sanctions Bill [HL]
I start with the usual reminder that, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Clause 40 [Discretionary requirements]:
135: Clause 40, page 16, line 43, at end insert—
“( ) For the avoidance of doubt, the steps to be taken by the regulator in order to be satisfied as required by subsection (2) shall, for the purposes of the Regulation of Investigatory Powers Act 2000 (c. 23), constitute the prevention or detection of crime as defined in that Act and sections 39 and 42(2) and (3) shall be construed accordingly.”
The noble Viscount said: I shall try to be as quick as I can, but this is a complicated point and, although I have given notice of it to the noble Lord, Lord Bach, other Members of the Committee might not be entirely familiar with it.
Clauses 61 and 62, towards the end of the Bill, list offences for which a regulatory body, including a local authority, may decide to impose a civil sanction, and for which there will be guidance. I understand that all this will be done through the usual fleet of statutory instruments, so we do not know at the moment which sorts of enforcement procedures will be included. Individuals who trade—for instance, small farmers—will certainly be included.
A local authority may well wish to use the powers in the Bill to use civil sanctions in a particular case in which it is allowed to do so under whatever guidance emerges. If it wants to accept an enforcement undertaking, for example—to save time, I will not go into stop notices for the moment—under Clause 40(2) it may do so only if it is satisfied to the criminal standard of proof that the person has committed an offence.
The notional doorstep salesman, whom I mentioned before, can take a great deal of money from vulnerable individuals; one of the jobs of the trading standards department is to spot that this is going on and to do something about it. One of the ways in which the department can trace this activity is to use the closed circuit television system to watch the people going up the street. Under the Bill, members of the department will have to go across the street where there is a local authority dividing line down the middle; otherwise, they are not regulated persons. It is perfectly possible that they will do this. This is covert surveillance.
The background to this is that when the Government introduced the Human Rights Act 1998, they did not incorporate the European Convention on Human Rights into English law, but they did require all public authorities to comply with it. There is nothing wrong with that; it is an excellent thing. The difficulty was that it was suddenly realised that Article 8 deals with privacy—private life in the convention, and private information in the transposition to British law. There has never been any law on privacy in any part of the United Kingdom, unlike the situation for most of our European neighbours, who have provisions on privacy. The Government therefore passed the Regulation of Investigatory Powers Act 2000.
RIPA attempts to incorporate into English law the provisions of Article 8.2 of the convention. That article protects a public authority if it infringes privacy rights by means of, for example, covert surveillance, provided that it does so in accordance with a given procedure, which is taken directly from the article. The original version of RIPA included, in Sections 28 and 29, practically all the grounds on which a public authority could seek this protection. Those grounds are public health, public safety, crime and disorder and economic well-being of the country, as well as a few others, but not the protection of the rights and freedoms of others, which is provided for in the convention but not in the Act.
In Scotland, to which this Bill also applies, a provision was passed by the Scottish Parliament equivalent to Part II of RIPA. It includes the grounds of prevention and detection of crime and disorder, public health and public safety. However, under the Scotland Act 1998, the entire European convention was incorporated into Scots law. Therefore, whatever is said in the Scottish equivalent of RIPA, people can use all the grounds under Article 8.2—including the protection of the rights and freedoms of others—as indeed they do, and those cases are upheld by the courts. In other words, the legislation is bypassed by the Scotland Act.
In England, things went along all right until the Home Office decided that it would restrict the grounds on which public authorities could use covert surveillance. It did so through Statutory Instrument 2003/3171. The grounds that different public authorities can use vary, which I do not understand, but local authorities can now use only the ground of prevention of crime and disorder. Unless this ground can be conscientiously used, local authorities have no powers to carry out covert surveillance without forfeiting the protection that they are granted under RIPA. Conscientious authorising officers who grant the authority to carry out covert surveillance look to see whether the proposed action is in accordance with the permitted grounds.
One of the problems that arose in the earliest stages of RIPA is what one does about employees of a public authority if they are, for example, malingering or taking second jobs. On the face of it, one would think that that was fraud and therefore a crime. However, there was a long dispute about that, as authorising officers said that it would not be treated as a crime but would be dealt with by disciplinary means. I know of one big police force that was unable to get authorisation for covert surveillance in order to back up disciplinary proceedings, because one can get authorisation only if one has evidence. Again, one has to be satisfied to a reasonable standard that a crime has been committed, so one needs to get an authorisation.
This remained in limbo, as no one knew the answer, until the Investigatory Powers Tribunal was confronted with about 17 cases on what to do about covert surveillance for public authority employees. In one comparatively simple case, a police sergeant tripped over a mat in the police station. He said that he had hurt himself and he retired sick on a pension. Then he discovered that, as this had happened while he was on duty, he was entitled to an enhanced pension, which he claimed. The police authority did not believe a word of it and, when it went out with cameras and other methods of discovering what was going on, it found out that he was not sick at all; in fact, it was a complete fraud. The authority did not give him his enhanced pension and he complained.
Under Part II of RIPA, only one body can deal with complaints: the Investigatory Powers Tribunal, set up by almost incomprehensible verbiage in Section 65 onwards. It has its own special rules of procedure. There is a perfectly good reason for that: it deals with some highly sensitive matters to do with national security and so it cannot allow the public to know all the details of everything that it does. However, that does not give the other side an opportunity to see what the case is against them, the tribunal does not deliver reasoned judgments and the rules are most unusual. The tribunal has ruled for itself that it will comply with the rules of a fair trial under Article 6 of the European convention. However, only the tribunal can make that judgment because nothing it does is susceptible to being appealed or judicially reviewed in any way. Therefore, the tribunal has to do this sort of thing as a form of internal housekeeping.
The tribunal was confronted with the case of the police sergeant who complained that his pension had been withheld. It noted that it had an awful lot of similar cases and wanted to get to the bottom of the issue. I have promised the noble Lord that I would read out only a short part of the decision, but it is a very interesting one:
“A coherent RIPA scheme includes the special procedures for dealing with claims and complaints about the use of investigatory powers in performing the core public functions of the public authority. The special procedures are not required for and do not fit a case like this. The application of the special procedures for adjudicating on claims and for investigating complaints would mean that the applicant would be deprived, for no sensible reason, of the protection of ordinary procedures of an open adversarial hearing, of a reasoned decision and of the right of appeal against or judicial review of an unfavourable decision. It is improbable that Parliament ever contemplated that these restrictions would apply in a situation in which there is no sensitive information or intelligence, and in which no national security or other public interest considerations could arise”.
The tribunal declined jurisdiction, saying that the case did not fall within Part II of RIPA, and went on to say that the proper ground for investigating what the police sergeant had done was a matter not of crime and disorder but of the economic well-being of the country. That expression, like,
“the protection of the rights and freedoms of others”,
is a civil law expression; both are given a wide interpretation by the Strasbourg court and in this country as a result. The tribunal therefore declined jurisdiction and simply left it to the pension applicant and the police authority to go through other routes.
My fear about the bits of this Bill about which we are talking, particularly the list in Clause 62 and the range of alternative civil sanctions, is that authorising officers in local authorities will say, “Parliament has said quite clearly that this is not going to be treated as a crime. There is now a huge statutory instrument that lists all these things and so we will be able to use these civil sanctions instead. We have no powers to allow covert surveillance”. That being the case, there is no protection for the authority.
I wish to make it entirely clear that on this occasion Parliament is alive to the issue, which it plainly was not when the statutory instrument was approved in 2003. We must make absolutely certain that the introduction of civil sanctions does not reduce the ability of a local authority to fulfil the test under Clause 40(2) whereby it has to be satisfied to the criminal standard of proof. This will not make it a crime, because, although basically a criminal offence is involved, it will be known, because of the guidance given under later parts of the Bill, that the criminal procedures will not apply. Therefore, there will be a great deal of confusion.
I can tell the Committee that local authorities do not like to carry out covert surveillance unless they know that they have the protection of RIPA, because that means that they will have an answer to all problems, whereas it is impossible to know what an employment tribunal or some other court would say in other circumstances. My fear is that, unless we get this cleared up, local authorities will simply not use the enforcement powers that they have been given, or not the civil sanctions, anyway, because they will not know where they stand.
I hope that the noble Lord understands that. I am afraid that it is terribly difficult to explain, but I have done my best. There needs to be a solution. I do not put forward my drafting as necessarily the right one; the amendment was tabled to raise the point, because the only ground left is the prevention and detection of crime and the prevention of disorder. If there is some other way of doing this, I shall be only too delighted. I should be very glad to see the demise of Statutory Instrument 2003/3171. I should also be very glad to see the introduction into English and Welsh law of the ground of the protection of the rights and freedoms of others, which is already in Scots law. I cannot see why there should be a difference. That means that the Home Office will have to change its mind but, after all, we have joined-up government. If the matter arises in the context of the noble Lord’s department and there is a problem that has to be resolved with the co-operation of the Home Office, I hope that that would not be beyond the wit of Ministers. Therefore, I place the amendment before the Committee as raising what I believe to be a serious difficulty about the Bill. I beg to move.
The Committee will be very grateful to the noble Viscount—the Government certainly are—for raising this important issue and for the way in which he has put the case not just in Committee today but when Professor Macrory came to visit us, in his Second Reading speech and privately. It is an important issue. I am of course aware that my noble friend Lord Jones of Birmingham wrote to the noble Viscount on the matter after Second Reading; that letter has been placed in the Library. I do not know whether the noble Viscount found his response helpful; he clearly did not find it definitive.
We understand the noble Viscount’s reason for wanting to make absolutely clear that, where surveillance is necessary for the purpose of preventing and detecting crime and is authorised appropriately under RIPA, such surveillance may be undertaken even when the new civil sanctions are being considered alongside the criminal sanctions. RIPA—here I speak in shorthand and, albeit in not such a sophisticated way, put the point that the noble Viscount made in moving his amendment—provides a framework for the authorisation of investigative methods, including conduct of covert surveillance and the use of informants where they are necessary and proportionate to achieve a legitimate aim.
As the noble Viscount said, we must ensure that proper respect is given to any interference with individuals’ human rights. Regulators have to obtain an authorisation to use these methods in their investigations when they are likely to interfere with convention rights. That authorisation must be for a specified purpose within RIPA—as we understand it, a purpose such as the prevention or detection of crime, the interests of public safety and the interests of protecting public health. Most regulators are, frankly, as the noble Viscount stressed, restricted by order to authorising only conduct necessary for the purpose of preventing and detecting crime. However, where an authorisation is necessary for the prevention or detection of crime and the conduct to be authorised is proportionate to what is sought by carrying it out, the regulator may of course seek that authorisation even though an outcome of that criminal investigation might be the imposition of a civil sanction.
Let me put that in a different way. The conduct and powers that may be authorised and exercised under RIPA can be used for an investigation of a criminal offence within the scope of the Bill, regardless of whether the ultimate sanction is criminal or civil. The regulators are looking at a criminal offence. It may turn out to be dealt with either in the criminal courts—as we think happens a little too often now—or by a penalty that involves civil sanctions, but it still remains an offence; it is still a crime that is on the statute book.
That is on the basis that such conduct and powers are in accordance with the purpose for which the authorisation was given. In the case of regulators covered by the Bill, the most relevant purpose will be the prevention or detection of crime because so many of the regulations that are breached—the ones we are talking about here—are all, in their own way, criminal offences. I am advised that other purposes, such as the interests of public safety, may be relevant for some regulators such as the Environment Agency. Whatever the purpose, any interference with an individual’s rights must not be undertaken without proper assessment of whether it is legitimately in pursuit of that purpose.
The noble Viscount makes the point that councils are prevented from getting authorisation for covert surveillance when, for example, the matter in question is disciplinary proceedings, because of the civil sanctions that would arise from that. While RIPA can be used only for the prevention or detection of crime, I am advised that it is broadly interpreted. The fact that the sanction is civil does not, as I have attempted to argue, remove the criminal nature of the offence. The Government are therefore confident that local authorities can rely on RIPA in those circumstances.
The noble Viscount will know better than I that the Home Office is revisiting and consolidating all the RIPA orders for surveillance activity. I assure him that we will consider, as part of the review, the important point that he has made so eloquently to the Committee today. He himself says that the wording that he has used in the amendment may not be perfect drafting. I fear that it goes a little further than that: it could be misinterpreted as giving a kind of blanket authorisation to regulators to use these investigatory methods in every investigation that they conduct without making the proper considerations that are rightly required by RIPA and which the noble Viscount expects to see when exercising his responsibility to oversee public authorities’ RIPA authorisations in his distinguished role as an assistant surveillance commissioner. If there is a danger of misinterpretation, that would not be desirable.
That is why we cannot accept the amendment, but I want the noble Viscount to know that the Government as a whole, for whom I answer, are looking at how RIPA works in terms of surveillance activity. Although I cannot fully answer his point today to his satisfaction, the point that he has raised will be considered as part of our process.
I thank the noble Lord for that reply. I know that a review is going on, but it has always been about the law enforcement agencies and nothing to do with local authorities, which have not been involved in it at all. I do not suppose that my drafting is in any way perfect—it very seldom is—but I want to avoid the passing of a Bill that creates another confusion.
The noble Lord heard what the IPT said. The police sergeant was undoubtedly committing a crime and defrauding the police authority. There is no difficulty with that, but the IPT said, “No, it’s about the economic well-being of the country”. A number of the duties of public authorities are to do with public health and safety, as the Minister said, but they are not allowed to use that ground because the Home Office has removed it from them. I want to ensure that we do not get into a position whereby Parliament, having been faced with this situation, has not made it clear, as the IPT said in the previous case, that local authorities are still allowed to use covert surveillance authorised by RIPA in cases where civil sanctions are to be used.
I do not think that there is any point in pursuing this amendment any further, but I would like to see something in the Bill about this to make sure that Parliament has noted what the IPT said in its decision. We will never get any further with the IPT; its decisions cannot be appealed against or judicially reviewed. Therefore, only Parliament can do something about this. I hope that, perhaps at a later stage of the Bill, the noble Lord will after consideration find some form of wording that will ensure that Parliament really has considered this point and given local authorities the powers that they require to collect under Section 40 the evidence that they need to fulfil their duties. I am sure that the noble Lord will do that.
Before the noble Viscount decides what he will do with his amendment, I have been advised that local authorities and government investigators are fully involved in the current review. He knows that I cannot make any promise at all that the Government will put something into the Bill; I have to be clear about that, not least because the review is taking place. As I understand it, the Home Office is also reviewing the applicability of IPT decisions. The noble Viscount is much more expert than I am on this; this seems to be a fundamental review that can hardly fail to cover the points that he made. I am told also that the Home Office is revising the codes of practice. We will be making it clear that prevention and detection of crime relates to the crime itself, not the penalty imposed, but I do not think that the noble Viscount is concerned about that issue. I wanted him to understand where we are at the moment.
I am sure that my colleagues in the Office of Surveillance Commissioners will be glad to read what the noble Lord said. I have not raised this matter on its behalf; I did so because it is within my knowledge. There is a lacuna here: if the review is going to put it right, then I welcome that, although this is the first that I have heard of it and I will believe it when I see it. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 136 not moved.]
137: Clause 40, page 17, line 3, at end insert “subject to a maximum amount to be laid down in the order”
The noble Lord said: When we debated Clause 37, I, among others, raised the matter of the quantification of the maximum amount of the fixed penalty. The Minister told us in the debate on Amendment No. 112 that the criteria would be specified in an order subject to the affirmative procedure. That was helpful, even if it did not quite go all the way. I asked for the amount and he stated the criteria, which I agree might do the trick if they are sufficiently tightly drawn and clearly set down. Will he tell the Committee whether the criteria in respect of the disciplinary procedure will again be specified in an order that is subject to the affirmative procedure? If so, will we be able to see the draft wording at least of the criteria before Report? I move the amendment to allow him to respond. I beg to move.
I cannot guarantee that those criteria will be in final form by the time we get to Report. However, I guarantee to ask my officials to give as much current information as there is at that time to noble Lords, either through amendments to be moved on Report or by way of letter. In other words, we will keep the noble Lord and other Members of the Committee up to date. I cannot go further than that.
The noble Lord will know that the Delegated Powers and Regulatory Reform Committee accepted the absence of a limit for variable monetary penalties imposed for either-way offences and invited the Government to make a case for having no limit in summary-only offences. We do not feel that it would be appropriate to require the Minister conferring the power on a regulator to impose discretionary requirements to cap the variable monetary penalties. To do so would restrict a regulator’s ability to tackle non-compliance effectively. The new sanctioning powers are designed to be flexible enough to cover a wide range of regulators. Regulators such as the Financial Services Authority already have the powers to impose unlimited financial penalties.
When giving a regulator access to variable monetary penalties, the Minister will need to design the regime to ensure that such penalties are flexible and, of course—this is one of the crucial points behind Macrory—able to capture the financial benefit to the business arising from the non-compliance in order to ensure, frankly, that compliant businesses have a level playing field with those that have not been compliant. This was a key recommendation not only of Macrory but of Hampton before him.
It may be difficult for a Minister to cap variable monetary penalties as he may not be able to predict the combination of aggravating factors and the level of financial benefit gained from the business’s non-compliance. One example of a high-level penalty was the FSA’s finding on Citigroup Global Markets Limited in June 2005. Citigroup was fined nearly £14 million for failing to conduct its business with due skill, care and diligence and for failing to control its business effectively when it executed a trading strategy on European government bond markets in August 2004. The financial penalty was composed of two elements: first, a relinquishment of the profits earned from the bond trading of nearly £10 million; and, secondly, an additional penalty of £4 million.
If any cap on variable monetary penalties is applied, regulators may not be able to tackle in full some instances of non-compliance. It is worth noting that Professor Macrory specifically ruled out a cap based on a business’s turnover, arguing that such an upper limit would place undue legal complexity on the system and could encourage regulators to set VMPs at inappropriately high levels. That is not to say that they will not be capped in practice. In making an order under Part 3 of the Bill, the Minister may consider that such a cap is necessary. However, we do not think that should be an obligation on the Minister in every case.
In the absence of a cap, the regulator will still be required by Clause 61 to publish guidance setting out the matters that it is likely to take into account when setting the level of VMPs so that there will be transparency in the process. The business will be able to make objections and representations about the level of penalty after the notice of intent is issued and will be able to appeal against the penalty.
The noble Lord’s amendment makes a point in relation to summary offences. Not many summary offences will lead to a variable monetary penalty because, by their nature, they will be either-way offences or able to be tried only on indictment. The limit for summary offences in the magistrates’ court is £5,000 per offence, so there may be a point in limiting summary-only VMPs to £5,000. We have not reached a firm conclusion on that. I am grateful to the noble Lord for raising this issue. I hope that he will allow us to go away and consider that part of the amendment.
I am grateful to the Minister for the information that he says will be forthcoming. I hear what he says about not specifying a maximum. I may not have been listening carefully enough but I did not hear whether, again, the criteria will be laid down in an order subject to the affirmative procedure. Perhaps he can comment on that.
I have in front of me an explanation of how variable monetary penalties can be calculated, but I think that the noble Lord is asking whether the criteria, when published, will be by way of affirmative procedure. As I understand it, the criteria will be set out in the guidance but will not be part of an affirmative order.
I thank the Minister for that. I shall need to look carefully at what he said, some of which I found slightly confusing. On that basis, for today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 137A had been withdrawn from the Marshalled List.]
Clause 40 agreed to.
Clause 41 [Discretionary requirements: procedure]:
[Amendment No. 138 not moved.]
139: Clause 41, page 17, line 24, 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: The amendments that I propose to Clause 41 raise the same questions in the context of the discretionary procedure as I raised when we debated my amendments to Clause 38 in the context of the fixed penalty regime. They go to the issue of multisite businesses, to the need for independence and to an obligation on the enforcer to prove guilt rather than this rather more unusual need to prove innocence.
We understand that the discretionary procedure is to be used for a higher level of regulatory non-compliance than fixed penalties are. While the Minister may therefore give similar responses to those that he gave to my analogous amendments in respect of fixed penalties, does he not accept that the need for safeguards—for example, allowing oral representations and providing for some level of independent referral—is even higher where the penalty can be higher?
I noted the Minister’s objection to my phrase “independent person” when we debated my Amendment No. 126, as I did his objection to the phrase “independent judicial person” in response to Amendment No. 120 in the name of my noble friend Lord Cope. I do not wish to be pedantic about the wording—I am sure that the Government can do better than I can—but we are even more concerned in the area of discretionary penalties about a lack of flexibility and independence in the appeal process than we were in the fixed penalty environment. I move this amendment to allow the Minister to respond. I beg to move.
Although my Amendment No. 142 is due for a separate debate, it is covered by this group. In particular, it is extremely analogous to Amendment No. 143, as my noble friend Lord De Mauley has already indicated. I do not want to speak to it at length because, in effect, I spoke on the same point when we debated the earlier clause. Nevertheless, like my noble friend, I think that a degree of independence in the review is required. Whether that should be quite as strong as suggested by the words “independent judicial person” in my amendment is a matter for discussion. Perhaps it goes a little too far, but a degree of independence seems to be desirable if this part of the process is to have any point.
I, too, support the amendment and the words of the noble Lord, Lord Cope. This fundamental matter was debated at Second Reading. I think that the Government’s basic response has been that someone different within the regulator will deal with the issue. I am reminded of the principle of Chinese walls that operates in the City: as we all know, they have chinks in them.
I shall deal with each amendment in this group separately. With regard to Amendment No. 139, as the noble Lord, Lord De Mauley, accepted, we have already said, in response to his Amendment No. 122, that we understand the concern that multisite businesses have about the service of enforcement notices. However, we do not feel that it would be appropriate for either the enforcing authority or the business for all notices across the country to be served only by a primary authority and only on a designated person within a company. I hope that the noble Lord will forgive me if I do not repeat the arguments; he anticipated rightly that they are the same. I stress, though, that we consider these to be operational issues that do not need to be set out in the Bill. We feel that the policy aim behind both this amendment and Amendment No. 122, which we debated the other day in Committee, might be better achieved administratively through the primary authority notifying the business whenever a sanction is imposed.
On Amendment No. 141, the Bill requires a business to put its representations against the proposed imposition of a discretionary requirement in writing. We think that that is appropriate; we have had discussions in which the Government have given some ground on other matters that need to be put in writing under the Bill. However, there is nothing in the Bill to prevent the business from also making oral representations to the regulator. Indeed, we rather hope that such dialogue will be part of the more flexible ongoing relationship between the business and the regulator. The requirement for representations to be made in writing is to ensure clarity and to enable both parties to maintain a clear record of discussions that have gone on.
Amendment No. 143, which has been supported by the noble Lords, Lord Cope and Lord Razzall, proposes that the representations following a notice of intent to impose a discretionary requirement should be heard by an independent person. The distinction between variable and fixed monetary penalties is that a notice will be served on the business that there is an intent to impose a discretionary requirement. I repeat that it is not clear from the amendment who that independent person would be and what powers he or she would have. Unlike the amendment to which the noble Lord, Lord Cope, has just referred, which specifies that the independent person should be judicial, this amendment says simply that the person should be independent. Our worry with that is that, if the amendment were accepted, further provision would need to be made in the Bill for that independent person. We think that that would increase the complexity and bureaucracy of the process of imposing this higher sanction.
The amendment could also give businesses that have clearly breached the regulations two rights of appeal against a sanction, one before imposition and one after, possibly to two different bodies. There is a basic right of appeal and it is important to maintain that, but we think that two may be overly bureaucratic and not necessary in the interests of justice.
In the case of discretionary requirements, the notice-of-intent stage is part of an ongoing dialogue between the business and the regulator. Requiring the involvement of an independent person in the process would undermine it. In particular, with discretionary requirements a business may wish to offer undertakings in order to mitigate a penalty, and that can take place during the period of representations. If the amendment were accepted by the Government and such undertakings were made instead to an independent person, again a further period would need to be built in to allow those undertakings to be considered by the regulator. Once more, we think that this would be an unnecessary increase in bureaucracy and in the time involved with imposing a sanction. We are trying to lighten the bureaucracy as much as we can.
We understand the concerns of noble Lords about regulators other than courts determining whether a person is liable to a sanction, which is precisely why we have a right of appeal against a sanction to an independent and impartial tribunal. I hope that what I have said goes some way towards reassuring the noble Lord.
I am grateful to the Minister. I will need to go away and think about his point about a clearer definition of the independent person and who that is. Also, I do not necessarily accept the point about two appeals. We feel that it is important that the appeals should be capable of being lodged before there is a determination of guilt. For today, however, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 140 to 147 not moved.]
148: Clause 41, page 18, line 7, leave out “may” and insert “shall”
The noble Baroness said: My noble and learned friend Lord Lyell apologises to the Committee that he cannot be present this afternoon—
Will the noble Baroness give way for a moment? This is in order, I hope, to be of assistance. In due course I shall invite the noble Baroness to withdraw the amendment that she is about to move because we are happy to take the issue away and return to it on Report. I thought that it might be helpful to tell her that at this point.
I am only too delighted not to speak to the amendment, on which I had only a few lines to repeat. It makes a nice change.
[Amendment No. 148 not moved.]
[Amendments Nos. 149 and 150 not moved.]
Clause 41 agreed to.
Clauses 42 and 43 agreed to.
[Amendment No. 151 not moved.]
Clause 44 [Stop notices]:
152: Clause 44, page 20, line 2, leave out “, or presents a significant risk of causing,”
The noble Viscount said: This is quite a different point, which goes with Amendment No. 153. I am told by the local authority associations that the words on page 20 in subsections (4)(b) and (6)(a) to (c)—
“the activity as carried on by that person is causing, or presents a significant risk of causing, serious harm to … human health … the environment … and … the financial interests of consumers”—
have an extremely bad track record. The Environment Act 1995 inserted into the Environmental Protection Act 1990 a whole series of new sections, one of which, Section 98A, deals with contaminated land. It gives powers to local authorities where it appears that the condition of the land by reason of substances in or under it may cause significant harm, or there is a significant possibility of harm being caused by the substance. It goes on to say that,
“what harm is to be regarded to be ‘significant’ shall be determined by guidance”,
under Section 78YA—yet another section; they ran out of letters. That was in 1995.
This time, it is a Defra matter. The guidance on what is significant has never been issued. It was going to be subject to parliamentary approval but, 13 years later, nothing whatever has happened. I therefore tabled the amendment to see whether I could find out what the Government think,
“significant risk of … serious harm”,
actually means, because the Minister’s sister department has failed to do so for 13 years. Can the noble Baroness enlighten us, by any chance? That would be a great help. At the moment, the thing is unenforceable and something needs to be done about it. I beg to move.
I support the noble Viscount’s point. Our Amendment No. 152A, which is in this group, tests the same point as the noble Viscount is making. I shall also speak to Amendment No. 155, which raises a different point.
I am sure that it is common ground on all sides of the Committee that we fully support the inclusion of stop notices in the Bill. The stop notice enables regulators to put an immediate halt to activity that is causing or is likely to cause harm to human health, the environment or the financial interests of consumers. It is also common ground on this side of the Committee that the test as drafted that regulators must prove before deploying a stop notice is set so high that, we fear, the sanction will not be used in circumstances where it would be justified.
We can play around with the word “serious”; we can all think of examples. For example, there are circumstances when a small number of people may be badly affected by a business activity. Does that qualify as serious? It is obviously serious to that small number of people. Alternatively, a large number of consumers might suffer minor detriment individually as a result of a business activity, but the financial windfall for the company is huge. Again, does that count as serious?
With the help of the National Consumer Council, I think that I can do slightly better than the noble Viscount’s legislative precedent in relation to concern about the use of the word “serious”. We can go back to the Legal Services Act 2007, where—on the advice of parliamentary counsel, I assume—the Government used arguments about ambiguity to resist amendments that used words such as “significant” and “serious” in the same context as they are now being used in the Bill. The conclusion was that such words are difficult to interpret and that it was likely that the court would be called on to decide what was meant by those terms. I very much look forward to the Government’s response on that point. I know that we have joined-up government, but do we have historical precedent-led government as well? The arguments that were used on one side of the coin on the Legal Services Act seem to be used on the other side here.
Amendment No. 155 raises another serious point of principle. As the Bill is drafted, if a stop notice has been served on a business, perfectly correctly, and the business has then rectified the peril that it has been asked to rectify, the regulator has a maximum of 14 days before that business has to be enabled to restart its business activity. That seems to us to be far too long. The business may well have immediately stepped in to rectify the activity or omission at which the stop notice was aimed but is none the less out of business for 14 days. We think that 14 days is too long, which is why we have proposed seven days in Amendment No. 155.
I had the happy opportunity to speak to her before we came into the Room; I asked whether the entire list in her portfolio was going to be absorbed within her BERR brief and she told me that it was. If anyone else reads it, they will find it quite extraordinary. I expect her to be on her feet most of the time. It is marvellous to welcome her and I hope that she enjoys being in your Lordships’ House.
We on these Benches intend to oppose Clause 46. We do so on a probing basis so that the Committee may discuss the criticisms of this part of the Bill that were published in the Delegated Powers and Regulatory Reform Committee report. Clause 44 enables an order to confer power on a regulator to stop activity in certain circumstances when he reasonably believes that the activity involves or is likely to involve the commission of an offence. This is a powerful weapon for a regulator and potentially of enormous significance to the regulated person.
The acceptability of the delegation depends on the robustness of the compensation arrangements, but Clause 46 leaves it to the order to state the case under which compensation will be awarded. In particular, there is a power for the order to provide that compensation is payable only in prescribed cases. However, I follow the committee in thinking that this is insufficient. For stop notice delegation to be acceptable, the Bill must specify the essential elements of the compensation arrangements that Parliament considers necessary. In particular, the Bill should specify the result that any order-making provision under Clause 46 needs to secure.
I look forward to hearing the Minister’s response and take the opportunity to ask her again whether she or Her Majesty’s Government have any faith in the parliamentary system given that this Bill again and again delegates decision-making to the Civil Service.
I thank noble Lords for their welcome. It is a pleasure to be here in Committee. On the point made by the noble Viscount, Lord Colville, about the definition of,
“significant risk of … serious harm”,
this will be up to the regulators to determine in individual cases. The threshold has been set deliberately high so that the regulators are not serving stop notices indiscriminately. Regulators are already experienced in deciding what these tests mean. For example, the word “serious” already features in health and safety legislation; “serious personal injury” is the threshold for prohibition notices made under Section 22 of the Health and Safety at Work etc. Act 1974 and, in time, we would expect the tribunal to establish case law on what constitutes significant risk of serious harm.
As to the specific question raised by the noble Lord, Lord Razzall, the Government resisted the use of “significant” in the case of the Legal Services Act 2007 because they felt that it would set the bar too high for the purposes of that Act. The use of “significant” and “serious” in the Bill is limited to only one sanction—stop notices. We are of the view that this is justified. Stop notices are the most far-reaching of the new sanctions and will require at least some part of a business to cease operating. In some cases, stop notices will require a business to shut down completely. These notices should be used only in the most serious circumstances. The threshold is therefore set deliberately high to ensure that regulators do not serve them indiscriminately. A number of less onerous civil sanctions are available to the regulators where the risk is not significant or the harm is not serious, and alternative sanctions such as the discretionary requirement should be used. This is in keeping with the principles set out in the Hampton and Macrory reviews. As I said, case law will establish this in due course.
On Amendments Nos. 152 and 153 and stop notices overall, it is important to be able to prevent an offence from occurring when there is a significant risk of serious harm to the public or to the environment. It would not be in the public interest for the regulator to have to wait until the harm has been realised before taking action. These measures were included following consultation on the draft Bill last summer. The concept of preventive notices received strong support in the consultation, with three-quarters of the respondents across the stakeholder group suggesting that they would be a useful additional power.
We have already built important safeguards into the Bill. The first is the high threshold. There is also a right of appeal against the sanction to an independent tribunal, and regulators will be required to establish a compensation scheme, as discussed. Noble Lords may wish to note that there are already forms of preventive stop notices, such as the one provided in the Health and Safety at Work etc. Act 1974, which may be used when an inspector is of the opinion that an activity that is or is likely to be carried on involves or will involve a risk of serious personal injury. Preventive notices therefore have an important role to play. It would be perverse for a regulator to have to sit back and wait for a serious offence to be committed and for the harm to be realised where such an eventuality may well be obvious.
On Amendment No. 152A, as we have discussed, stop notices are the most far-reaching of the new civil sanctions and are reserved entirely for serious acts of non-compliance. The threshold has been set high. I should point out that we asked during the consultation on the draft Bill whether the thresholds were set at the right level. Almost 60 per cent of respondents, including many regulators, agreed that the test was set at the right level.
On Amendment No. 155 and the period of time that the regulator has to issue a completion certificate for a stop notice, Clause 45(2)(c) requires a regulator who is satisfied that a business has taken the steps specified in the stop notice to issue a completion certificate. In practice, we expect this to happen as soon as it is practicable for the regulator to do so. Indeed, we would expect the regulator to keep under review the operation of any stop notice that they issue to ensure that the business has taken the required steps towards compliance.
The procedure in Clause 45(2)(e), which allows a business to request a certificate from the regulator confirming its compliance, is a safeguard intended to ensure that there is ongoing monitoring of the operation of the stop notice. We stress that the 14-day time limit in subsection (2)(f) is the maximum time in which the regulator must decide whether to issue a certificate. A seven-day limit would not always give regulators sufficient time to assess fully whether a business had complied with the terms of their notice. In some cases, for example, a regulator may need to carry out tests to assess whether the business is in compliance. A leaking pipe that has emitted toxic waste might need to be tested for toxins to ensure that they have returned to acceptable levels. In such a case, the regulator may have to wait for test results.
There may also be other legitimate reasons for delay. For example, the regulator may need to contact a third party to ensure that it is no longer suffering harm. A 14-day time limit therefore strikes the right balance between providing a safeguard for business and allowing regulators sufficient time to assess whether the business has complied with the terms of the notice. I should add that the order giving a regulator access to the new powers may provide whether stop notices are automatically suspended when the business appeals against a notice or whether this decision should be left to the tribunal.
Finally, I understand the concerns of the noble Baroness, Lady Wilcox, regarding the stop notice compensation. The Delegated Powers and Regulatory Reform Committee has also expressed concern regarding the detail of this provision, but I hope that we can explain why such detail is best left to secondary legislation. Due to the serious nature of stop notices, we believe that compensation should, in certain circumstances, be available where a notice is wrongly imposed. Accordingly, orders giving regulators the power to serve stop notices will have to provide for regulators, on application, to compensate businesses where they have suffered loss because of the service of a stop notice. The order will determine the specific grounds for compensation and will be subject to the affirmative procedure, so noble Lords will have the chance to debate it. The order will also determine the types of loss that can be compensated. Compensation might be appropriate where a business wins an appeal against the imposition of a stop notice and where the regulator is considered to have acted unreasonably or in serious default. Compensation will not be appropriate in all cases—for example, it may not be appropriate if an appeal is upheld on a technicality.
The Bill provides flexibility in allowing the order to prescribe the circumstances in which compensation might be payable. It would not be possible to prescribe in the Bill a detailed compensation scheme that would be appropriate for the wide range of regulators covered by the Bill. The provisions need to take account of any existing compensation schemes that regulators already operate, as well as the common law rights to compensation. The Bill is therefore not prescriptive on the form that any compensation scheme should take.
In the light of what I have said, I trust that the noble Viscount will now feel able to withdraw the amendment and I urge noble Lords to withdraw their opposition to Clause 46.
It was remiss of me not to welcome the noble Baroness, Lady Vadera, at the beginning, but I thought that I would wait until I had heard what she had to say. I have now heard it and will comment on it.
It was never my intention that local authorities should have to wait until the damage had been done before they could intervene. That was not the purpose of my tabling an amendment about the anticipatory arrangements. I simply wanted to raise the example of the Environmental Protection Act because I am told that this has made the provision completely unworkable. That cannot be right. However, I do not want to introduce any more guidance or statutory instruments into the Bill. Now that I have heard what the noble Baroness has to say, I just want to ensure that local authorities will take this pretty seriously.
We have heard a great deal about consistency; the Bill is all about that. I forecast that what local authorities consider to be serious or a significant risk of seriousness will vary greatly. Never mind—at last something is being left to the discretion of the local authorities. For that, I think that we should all be grateful. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 152A and 153 not moved.]
Clause 44 agreed to.
Clause 45 [Stop notices: procedure]:
[Amendment No. 154 not moved.]
155: Clause 45, page 20, line 35, leave out “14” and insert “7”
The noble Lord said: Although Amendment No. 155 was grouped with the previous amendments, it raises a different point. I shall of course read carefully in Hansard what the noble Baroness said but I am not persuaded by the argument regarding the choice of 14 days rather than seven. This is really the corollary of her defence of the seriousness of the stop notice. If the Government’s position is that regulators will issue a stop notice only for a serious matter, the regulator should be under an obligation, having closed down a business, to ensure that that business is restored to its business activity as quickly as possible once the remedy has been effected. I take the point that tests or third-party inquiries may be required, but if this is a serious matter and—it may be cheeky of me to say so—if the noble Baroness’s friend can give independence to the Bank of England within three days of taking office in 1997, seven days does not seem to be too long to restore to the business its activity when it has remedied the defect. But of course I shall not move the amendment.
[Amendment No. 155 not moved.]
Clause 45 agreed to.
Clauses 46 to 50 agreed to.
Clause 51 [Costs recovery]:
156: Clause 51, page 23, line 28, leave out “section 40” and insert “sections 37, 40 and 48”
The noble Viscount said: This is a genuine query. The Bill’s draftsman talks of “provisions” and “orders”. The provision in Clause 51 relates to Clause 40 and Clause 40 talks about provisions being made. I wonder whether the costs arrangements will be applied to fixed penalty notices, to all discretionary sanctions and to the stop notices. All these things cost time and money to get right, particularly if the person at the wrong end of the process is able to appeal. Could the noble Baroness explain whether the costs provision will apply across the board when local authorities have to use these new powers? I hope that they will. I beg to move.
I support the noble Viscount and shall speak to Amendment No. 179 in this group. I am much obliged to the Trading Standards Institute, which has made the suggestion reflected in my amendment. It is proposed that money from fixed and variable monetary penalties should be passed to the relevant consolidated fund. My amendment would permit money to be used for the benefit of local authorities and business to fund cases of national importance and relevance that would, for example, establish points of law. I look forward to the Government’s response.
The administrative sanctions in Part 3 offer regulators an effective alternative to criminal prosecution, giving them the flexibility to choose the most appropriate and effective sanction to match the particular instance of non-compliance. When pursuing a criminal prosecution, a regulator can reclaim its costs through the courts in the event of a successful prosecution. Where a regulator chooses to impose one of the new administrative sanctions proposed in the Bill, an issue arises over how a regulator can then reclaim its costs.
I note the concerns that have been expressed. We want to ensure that there is no financial disincentive to using the new sanctions. There is a real possibility that regulators could simply continue to use the routes of criminal prosecution even when that was not the most proportionate or appropriate response and therefore we have built in safeguards on cost recovery. In particular, businesses will have a right of appeal to an independent tribunal against both a decision to recover costs and the amount of such costs to the business.
As has been said, bringing in any enforcement action generates costs. Non-compliant businesses should not escape having to pay these costs simply because the regulator has chosen the administrative sanctioning route. There should be considerable savings for businesses should a regulator choose to impose a civil sanction. In particular, businesses will avoid the cost of legal representation before the courts.
In response to Amendment No. 156 and the question asked by the noble Viscount, Lord Colville, I should explain that the power does not extend to fixed monetary penalties because these are designed to be used to sanction low-level, more minor instances of non-compliance. Investigation costs for this type of offence should be much lower than for discretionary requirements or stop notices and should be borne by the regulator. Enforcement undertakings are excluded because they are offered by the business. For example, if a business discovers that it has inadvertently breached a regulatory requirement, brings that to the attention of the regulator and offers an undertaking to put right any harm that has been caused, the regulator’s investigation costs should, again, be much lower.
Amendment No. 179 is unnecessary given the cost-recovery scheme that I have just mentioned. However, there is a specific issue about the LBRO being the administrator for such a fund. The body was set up with the clear objective of promoting consistency of regulatory enforcement among local authorities. As such, it does not have the expertise in the administration of such a fund, which could amount to more than £30 million, nor does it have the remit to involve itself in the funding of local and national regulators’ legal cases. It will not surprise the Committee that we believe that, as with fine revenues, the Treasury is best placed to determine the use of funds. In light of what I have said, I hope that the noble Viscount will feel able to withdraw his amendment.
I shall have to read what the Minister said in the Official Report. I think that the answer was, yes, they will be able to get their costs back, but I could not swear to it because she went very fast and I was not entirely clear. If the costs are lower because the methods introduced by the Bill are used and they are cheaper, so much the better for everyone concerned.
I should like to ask two questions. First, stop notices are potentially going to apply to some quite serious matters of pollution, noise and so on that need to be stopped. A certain amount of skill and sophisticated instruments are required in order to carry out that kind of investigation, particularly if it has to be done quickly. I therefore believe that provision for the recovery of costs is needed for stop notices where they are successful. I see a certain amount of nodding; if that is so, I am very content.
Secondly, when the Bill says “provision”, which it does perpetually, will that mean another statutory instrument? If so, what form of parliamentary scrutiny will be provided? I cannot see anything in the Bill about provisions being subject to any kind of parliamentary scrutiny, and there are an awful lot of provisions. I should have asked about this before. Perhaps the noble Baroness can provide me with an answer.
I apologise for my lack of clarity. For fixed monetary penalties and enforcement undertakings, the costs will not be recoverable. For stop notices, they will be recoverable. With regard to the question of provisions and parliamentary scrutiny, this will be done through affirmative resolution.
I am very much obliged. That gives the Merits Committee some more things to get its teeth into and, if it wants to, the House can always debate it later. I am very grateful to the noble Baroness. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 51 agreed to.
Clause 52 [Appeals]:
157: Clause 52, page 24, line 12, leave out from “Part” to end of line 15 and insert “shall provide for the making of an appeal to—
(a) the magistrates’ court, or(b) the Crown Court.”
The noble Baroness said: My noble and learned friend Lord Lyell apologises to the Committee that he cannot be present this afternoon. The object of Amendments Nos. 157 and 160 is to probe the wisdom or otherwise of excluding the jurisdiction of the ordinary courts and allowing appeals only to a specialist tribunal.
As my noble and learned friend said last Thursday, the advantage of the ordinary courts is that they are part of a well established and trusted system and they exist all over the country. Provided that the prosecuting authority—that is, the regulator—makes clear the reasons for the prosecution and the injury done and/or costs saved by the alleged wrongdoer, the courts are well capable of imposing the appropriate penalty. Those penalties can indeed be substantial. To oust the jurisdiction of the ordinary courts on such a wide scale is unprecedented and a serious attack on the liberties of the subject.
The Statistics Board—the last regulator mentioned in Schedule 5—provides a good example of how the present system is well capable of bringing pressure to bear on wrongdoers without even proceeding all the way to court. The Written Answer to my noble and learned friend Lord Lyell from the noble Lord, Lord Davies of Oldham, on 28 January shows that in past three years the Office for National Statistics issued 90 summonses but proceeded with only 17 prosecutions, in every case obtaining a conviction. The noble Lord, Lord Davies, went on to say:
“Businesses served with a summons can then choose to comply with the legislation, which accounts for the lower number of cases going to court”.—[Official Report, 28/1/07; col. WA 92.]
In other words, in 73 of the 90 cases where summonses were issued, that alone was sufficient to bring about compliance, and in all the other 17 cases the wrongdoers were convicted.
However, it is said that the courts do not give adequate penalties. In his Second Reading speech, at col. 1242 of Hansard, the noble Lord, Lord Jones, cited a bad case of the unlawful disposal of 184 drums of toxic waste, for which the wrongdoer was fined only £30,000 when he had earned £58,000 for supposedly disposing of it lawfully and it had cost the waste authorities another £167,000 to dispose of it themselves. It seems surprising that the court, had it been told of these facts, would have given such a low penalty. Can the Minister investigate and tell us before Report in which court this occurred and how much of the above information was put before it? Could the case have been referred to the Attorney-General to put before the Court of Appeal as an unduly lenient sentence? We look forward to these answers before Report.
I draw the Minister’s attention to the executive summary of the impact assessment, obtainable from the Printed Paper Office, which says at paragraph 75 on page 25 that the Macrory review identified anecdotal evidence of a compliance deficit whereby,
“non-compliance … is identified but no enforcement action is taken because the regulator lacks the appropriate tool to effectively sanction”.
The evidence Macrory found pointed to,
“the heavy reliance on formal criminal sanctions”,
“makes the resolution of cases a costly and time-consuming exercise for both businesses and regulators”.
However, the experience of the Statistics Board referred to above shows that the mere threat of prosecution or issue of a summons is highly effective. Furthermore, the impact assessment says:
“In instances where there has been no intent or wilfulness relating to regulatory non-compliance, a criminal prosecution may be a disproportionate response”.
Quite so, but the mere threat is likely to be sufficient and is in no way costly. According to the impact assessment on page 24, even Professor Macrory simply says that he,
“identified anecdotal evidence of a compliance deficit”.
Paragraph 74, also on page 24, says:
“Current tools are not sufficient to deter the ‘truly’ criminal or rogue operators, and equally when cases do reach the courts, sentences imposed are not considered by industry to be a sufficient deterrent or punishment for the offences in question … A further concern from the business community is that some regulatory non-compliance is not sanctioned at all”.
Is this not the likely effect of ousting the jurisdiction of the courts? The truly rogue operators should continue to be prosecuted, but the unintentional offender will find a host of penalties slapped on him under a new tick-box system. Alternatively, large penalties will be imposed on the rogues by officials, but they simply will not pay them.
Is the Minister aware that the analysis in the impact assessment is actually very slight? How many cases were analysed when the supposed costs and benefits were being worked out? The answer is one; I refer noble Lords to paragraph 87 on page 27. Yet the number of cases with large penalties is likely to go up. According to paragraph 89, the number will jump from a total of 15,000 prosecutions to almost 19,000 a year in order to close the anecdotal compliance deficit.
The impact assessment does not say what proportion of these penalties will be fixed and what proportion will be variable. How many cases will the appeal tribunals set up under Clause 52(1) be expected to hear? What will each tribunal cost per day simply to provide the tribunal? Unlike magistrates, the members of the tribunal will have to be paid. They will also have to be identified and trained. Will they be independent? Will the Minister give some examples of real rogues?
Finally, could we have more explanation of the annexe to the full impact assessment issued by BERR? According to figure 4 at paragraph 36, the estimated savings in administrative burdens on business of this whole scheme are calculated at between £45 million and £65 million, as against administrative burdens imposed by regulators, the total cost of which is £3.631 billion. The overall cost of administrative burdens has been estimated at £13.7 billion. Out of 105 respondents, seven business representatives and 42 government and local authorities commented on the impact assessment. Will the Minister place these responses in the Library for us all to see?
In conclusion, our concern about this new administrative penalty system is well summarised in the peroration of the Minister himself when he talked about,
“something that is, on the face of it, a well-intentioned piece of regulation”,
“to cause unnecessary expense, bog down wealth creation, kill enterprise—specifically small businesses—and drive commercial activity into a mire of bureaucratic compliance”.
For the present, we look forward to the Minister’s answers to our questions before Report, but at the same time we ask the Government to think again carefully about the whole of Part 3. They can achieve their laudable objective of better regulation without it. I beg to move.
The noble Baroness, Lady Wilcox, has dealt clearly, comprehensively and with an abundance of argument with these amendments, which would otherwise have been spoken to by the noble and learned Lord, Lord Lyell of Markyate. She will not mind my saying that, despite the ability with which she has put forward the amendments, I am sorry that the noble and learned Lord is not in his place; we have had one or two private conversations about this and I know how keen he is on what I might put simply as preserving the role of the magistrates’ courts and the Crown Court in any new role that they would have under this Bill were it not for the insertion of administrative tribunals into the procedure. He feels strongly about that and, in earlier discussions in Committee, I have shared with him an enthusiasm for the success of the criminal law in dealing with a lot of regulatory offences, particularly under the Trade Descriptions Act 1968, which will celebrate its 40th anniversary this year. Moreover, it is not just the bringing of an action but, as the noble Baroness indicated, the threat of an action and a criminal penalty that so often proves to be such a valuable deterrent and incentive to better business conduct.
But, and I suspect that the noble Baroness thought that there would be a “but” somewhere along the line, she will remember that my noble friend Lord Bach made it clear that—along with the Macrory recommendations, the civil sanctions and the new remedies that may be sought and which we have been discussing in this Bill—the criminal sanctions for breaches of food law, health law, trade description law and so on are all still in place. They have not been taken away and, in suitable cases, they are all available to be brought. However, the point of the Bill, as has been explained many times by my noble friend, is that, while the criminal law will continue to be used as appropriate, there will be more flexibility once it comes into force. If the distinction is going to be clear between, on the one hand, criminal sanctions and penalties—the criminal aura and the burden that a businessman faces of having been found guilty of a criminal offence—and, on the other hand, the new flexibility offered by the so-called civil sanctions of stop notices, discretionary and fixed penalties and so on, it is not a bad idea to have a separate group of bodies dealing with the procedures covering how those sanctions are to be imposed. Hence we come to the regulator, along with the right of the person on whom a penalty has been imposed to appeal, not to the magistrates’ court but to an administrative tribunal.
I suggest that the different administrative tribunals have had long experience over the years, whether they deal with social security or employment issues, for example, and have built up a certain expertise. Moreover, they have been given the training to do that. Magistrates are not without training, but it has to be of a much more general kind. However, if you are a member of an administrative tribunal dealing with the kind of cases that we have been discussing—those turning on regulatory issues—no doubt the training can be much more closely focused on the legislation that you will be dealing with.
Nowadays, 50 years on from the Tribunals and Inquiries Act 1958, and following the tribunals Act last year, tribunals have equal status in the public mind; they are authoritative, fully a part of the judicial system, expert and apt for the jobs that they are asked to do. They are as trusted and established as the magistrates’ courts and the Crown Court.
I am second to none in my admiration for the intellect and understanding of the noble and learned Lord, Lord Lyell—and, indeed, for his handmaiden—but on this occasion I cannot support him. The Bill is about implementing the principles of the Hampton and Macrory reviews. We cannot go through the Bill and with every amendment try to sneak back something that goes against those principles. We either accept the system of administrative sanctions, which the noble Lord, Lord Borrie, described better than I could, or we do not, but we cannot keep amending the Bill until we have a hotchpotch of the existing system and the principles of the Macrory review. I suspect that the best procedure for the noble and learned Lord, Lord Lyell, would be to attempt to vote down the whole Bill. There is no point in having the Bill if we emasculate it by chipping away at the administrative sanctions in Part 3. On this occasion I cannot support him or the noble Baroness, Lady Wilcox.
In this clash of principles across the Floor, in which the Liberal Democrats have just lined themselves up with the Government, my Amendment No. 159 suggests a middle course. With the permission of the Grand Committee, perhaps I may speak to it now, because it covers very similar ground.
Whereas the amendment of my noble and learned friend Lord Lyell seeks to knock out the first-tier tribunal and replace it with a court of law, my amendment seeks to remove subsection (1)(b) and the reference to,
“another tribunal created under an enactment”.
It is unsatisfactory that we should sanction an appeal to an unknown tribunal. I am not sure whether these unknown tribunals are simply not specified—obviously they are not specified—or whether they have not been invented yet. Either way, we have no information about them and yet we are asked to sanction an appeal to them. It would be better if, while still allowing the appeal to the first-tier tribunal to remain in place—I am to that extent moving a little nearer to the Government and the noble Lord, Lord Razzall, than to my noble and learned friend—the ordinary courts of law remained within the loop rather than some new or unknown tribunal that we have yet to be told about.
The noble Lord, Lord Borrie, said, in effect, that these will become expert tribunals and that we should leave it to the experts. But, to a degree, the point of appeals in situations such as this is to bring the voice of the man in the street—the ordinary person—to bear on the decision being made rather than that of the experts. That is why we have lay magistrates and juries in the more important cases. I do not automatically jump to the idea that an expert tribunal can be expected to bring common sense to bear on a case that others may think to be unfair.
We have had an interesting debate and I am grateful to the noble Baroness, Lady Wilcox, for raising this important issue. I will not comment on what the noble Lord, Lord Razzall, said. On the 100th anniversary of the day that women got the vote, it would be inappropriate to do so.
Knowing the noble Baroness, I am sure that she said it in strong terms.
As the two noble Lords pointed out, this amendment, if carried, would absolutely be a stab in the heart of the Macrory principles. This is an important moment in a sense, because we know that the Government have accepted Macrory and obviously, given the speech of the noble Lord, Lord Razzall, the Liberal Democrats in this House have, too. I know that the noble Baroness was eloquently reading a speech written by the noble and learned Lord, Lord Lyell of Markyate, but it is an important point for all Members of the Committee to come to a view about—indeed, for Parliament to come to a view about. Is Macrory the way forward or is it not? If the amendment were carried, Macrory would effectively be a dead duck.
On the letters that have been asked for, of course I will write them. As for the details of the case that my noble friend Lord Jones of Birmingham graphically described at Second Reading, yes, it will be a pleasure to try to fill out a few more details, although, knowing how dangerous it is to take issue with a former Attorney-General, I do not think that offences—the noble Viscount, Lord Colville, will know the answer to this—such as those that we are talking about are likely to lead to any appeal against the lightness of sentence, because I do not think that the law allows for that. I see that the noble Viscount does not think so either; I am gratified by that. But we will see. We will look at that issue, too. That letter will be sent.
Professor Macrory found two main advantages in a tribunal hearing appeals rather than the criminal courts. First, a tribunal can comprise members with both legal and specialist expertise in the subject matter before it, thereby providing it with a fuller understanding of the regulatory issues. He pointed out that cases of regulatory non-compliance make up less than 1 per cent of all cases heard in magistrates’ courts, making it more difficult to provide specific training to magistrates and legal advisers—not impossible, but more difficult. Secondly, a tribunal would not consider regulatory cases alongside cases of conventional crime, which should constitute the main workload of criminal courts. Regulatory cases could be concentrated through one tribunal, enabling expertise to be built up over time.
Professor Macrory specifically ruled out some form of hybrid system—or “hotchpotch” system as the noble Lord, Lord Razzall, accurately said—with appeals against civil sanctions heard by the criminal courts. Professor Macrory argued for a clear separation between the criminal and civil systems. Tribunals were set up in the first place because they were considered to be more accessible than the courts and less formal. Businesses would be able to present their cases, should they wish to do so, without the greater need for legal representation. Tribunals will also be independent from regulators and will be able to ensure that the procedural and other rights of businesses are protected. For those reasons, and for the ones better set out by my noble friend Lord Borrie and the noble Lord, Lord Razzall, we could not accept the amendment.
The noble Lord, Lord Cope, as always, seeks the middle way between one view and another in order to help the Committee to come to a firm view. He asked when we would know which tribunal would hear appeals; he talked with a man-on-the-street perspective. That will be set out in the order giving the regulator access to the new powers. The order will be subject to consultation and the affirmative resolution procedure. Lay members can and do sit on tribunals.
The first-tier tribunal is to be set up under the Tribunals, Courts and Enforcement Act 2007 and will consolidate the jurisdictions of a number of existing tribunals—for example, the VAT and duties tribunals, the Financial Services and Markets Tribunal and the Pensions Regulator Tribunal—but a number of tribunals will remain whose jurisdictions will not be incorporated into the first-tier tribunal. The Explanatory Notes give the example of the employment tribunals, which currently hear some appeals on health and safety matters, but other tribunals, such as the Competition Appeal Tribunal, will not come within the first-tier tribunal.
The Bill is not prescriptive in determining which tribunal will hear appeals and I understand the noble Lord’s concern about which body the Minister may specify in the order. However, the exemptions are limited to statutory tribunals and would therefore exclude administrative tribunals or other less formal hearing panels. I hope that that is of some comfort to the noble Lord, although I take his point about it not being entirely satisfactory that we do not know at this stage which tribunal this will go to. However, it will not be an administrative tribunal; it will be a statutory tribunal.
Indeed. I hope that what I have said on the record will go some way towards assuring the noble Lord of that.
Before I sit down, I think that it is important just to back up the fundamental point that we are making about supporting Macrory. I pray in aid rather powerful and interesting bodies. The criminal sub-committee of the Council of Her Majesty’s Circuit Judges states:
“We support the view that a distinction must be drawn between matters of regulation and criminal offending. There is a pressing need to avoid expensive court time being taken up with matters that are better suited to an administrative penalty”.
EEF, the manufacturers’ organisation, which I believe the noble Baroness and my noble friend may both be seeing this evening, stated:
“EEF supports the principle of alternative penalties for regulatory offences as a mechanism for reducing demands on court time, speeding up the process of enforcement and sanctioning, and reducing the costs associated with this for business”.
We could not have put it better.
I thank the Minister for the care with which he has responded to the two amendments, especially as I was speaking to them on behalf of my noble and learned friend Lord Lyell. I thank the noble Lord, Lord Borrie, for his words, and my noble friend Lord Cope.
The object of the amendments was to probe the wisdom or otherwise of excluding the jurisdiction of ordinary courts. Based on my noble and learned friend’s experience, he feels passionately about this. As he has said, the ordinary courts are part of a well established and trusted system. They exist all over the country and they provide the prosecuting authority. We know from many other instances that, although a move away from the tried and tested can sometimes be exciting and more fun, it often turns out to be very sad. It is for this reason that the final amendment to be moved by this side of the Committee will propose a sunset clause to see how things develop as time goes by. For the moment, however, it is only right that I should withdraw this amendment. We shall read what the Minister said. I thank him on behalf of my noble and learned friend Lord Lyell for undertaking to go into the detail in a letter to be placed in the Library. We are most grateful for that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 158 had been withdrawn from the Marshalled List.]
[Amendments Nos. 159 and 160 not moved.]
Clause 52 agreed to.
Clause 53 agreed to.
161: After Clause 53, insert the following new Clause—
(1) When any of the conditions in this section apply, the local authority must publish the fact in a manner it considers appropriate.
(2) The first condition is that a local authority has imposed a fixed monetary penalty under section 37 and—
(a) no review notice has been served within the specified time, or(b) an internal review has confirmed the penalty and no appeal has been made within the specified time.(3) The second condition is that a local authority has imposed a non-compliance penalty under section 43 and no appeal has been made within the specified time.
(4) The third condition is that a local authority has imposed a stop notice under section 44 and no appeal has been made within the specified time.”
The noble Lord said: After those great clashes of principle, this proposed new clause is rather more probing in nature. It is obvious to anyone who knows anything about it that when breaches in these various laws occur, the sanction of a fine can be extremely important to the business concerned. But a fine is more likely to do real damage to a business, making it difficult to carry on, if it is a small concern. A giant supermarket chain finding one of its stores in trouble in the local courts or under this new arrangement can quite easily pay the fine and either forget about the problem or take steps to tighten up its procedures to avoid the breach happening again. Such an event is not necessarily damaging to the business overall. What is damaging is the publicity of being taken to court and dragged into the public arena for having caused a breach of, say, a food safety arrangement. It is this disparity between small and large businesses that I want to draw attention to with the amendment.
Nowhere in the Bill is it provided that the new system will involve any publicity at all. I thought I would suggest the new clause to see whether that is intended. Once the new arrangements get going, a cosy arrangement may develop to some degree between the regulators and the large businesses that are being regulated. In part that is what is intended and wanted. Indeed, the Minister said earlier today that the regulators and the regulated bodies will talk to one another more frequently than is the case at the moment. But if there is a breach and a cosy arrangement exists, we may not hear much about it having taken place. It may be hushed up after a quick payment is made, and on we go. In reality, that is no sanction against a giant firm—or at least it is only a very small sanction. On the other hand, it could crush a small firm or seriously damage its business. For many businesses, it would be a personal fine on the proprietor, as opposed to a big corporate entity, for which such a fine would be a microscopic proportion of its turnover or profits.
I am merely probing what publicity there will be to preserve both an effective sanction over and above fines and the balance of sanctions which seems to exist in the present system between small and large businesses. I beg to move.
I am grateful to the noble Lord, Lord Cope, because this is an interesting and perhaps difficult area. We agree that local authority regulators—and, for that matter, all regulators, whether local authority or otherwise—should publicise the details of their civil enforcement activity. That would lead to greater transparency and could prove to be a useful tool in encouraging compliance from those keen to maintain their public reputation. We very much take the noble Lord’s point about how publicity affects some more than others, in the same way that penalties affect some more than others.
Publicising details of enforcement actions was a recommendation of the Macrory review. Amendment No. 179A, which we shall come to later, replicates the wording of Macrory’s recommendation that regulators should publish details of all enforcement actions, including criminal prosecutions. This recommendation formed part of a wider discussion on improving the transparency and accountability of regulators.
The Government accepted all Professor Macrory’s recommendations and it is agreed government policy to improve the transparency and accountability of regulators. We therefore have some sympathy with the amendment, although the noble Lord will forgive me if I say that we do not accept the precise drafting. If he will withdraw the amendment, we will consider it further and return to this issue on Report.
Given that undertaking, I am happy to seek leave to withdraw the amendment. I have no particular pride in this bit of drafting. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 54 to 58 agreed to.
Clause 59 [Parliamentary and Assembly procedure]:
[Amendment No. 162 not moved.]
Clause 59 agreed to.
Clause 60 [Offences under subordinate legislation]:
163: Clause 60, page 26, line 38, at end insert—
“( ) Where a statutory instrument containing provision made under the power referred to in subsection (1) pursuant to subsection (2) would, apart from this subsection, be subject to annulment in pursuance of a resolution of either House of Parliament or of the National Assembly for Wales—
(a) the instrument is not subject to such annulment; but(b) the instrument may not be made unless a draft has been laid before, and approved by resolution of, each House of Parliament or (as the case may be) the National Assembly for Wales.”
The noble Baroness said: In its report on the Bill, the Delegated Powers and Regulatory Reform Committee recommended that the affirmative resolution procedure should apply to all orders that make provision under Clause 60. Clause 60 extends any power that a Minister has to create criminal offences in secondary legislation to include the power to create alternative civil sanctions. Under the Bill as drafted, this secondary legislation could be subject to the negative resolution procedure, unlike orders under Part 3. The committee considered that the affirmative resolution procedure should apply to all orders under Clause 60 and we are very happy to accept that recommendation. Amendment No. 163 gives effect to this by applying the affirmative resolution procedure to orders where the negative resolution procedure currently applies. I beg to move.
On Question, amendment agreed to.
Clause 60, as amended, agreed to.
Schedule 7 agreed to.
Clause 61 [Guidance as to use of civil sanctions]:
163A: Clause 61, page 27, line 13, leave out paragraph (a) and insert—
“(a) the Minister of the Crown and the Welsh Ministers must publish guidance about the use of the sanction”
The noble Lord said: I shall speak also to Amendments Nos. 163B to 163D. This group of amendments was originally drafted by LACORS and focuses the requirement to issue guidance about the use of civil sanctions on the Minister with responsibility rather than on the various local authorities as is proposed in the Bill.
These amendments are crucial to the removal of bureaucracy and inconsistencies from the proposed system. They would ensure that national guidance regarding the appropriate use of civil sanctions is issued by Ministers with responsibility for legislation and not by every regulator and every local authority. A requirement for every local authority and every national regulator to issue its own guidance about the use of civil sanctions under the same legislation is unnecessary and would lead to inconsistency and misunderstanding.
The amendments focus the requirement on the government departments, so there would be a single set of national guidance on how civil sanctions should be used for specific legislation. This would reduce costs for local authorities, assist regulated persons and entities, particularly multi-site businesses, and help ensure consistency in approach. It would help the Bill achieve one of its stated aims, which we have, again and again, seen left by the wayside on our journey through Committee. I beg to move.
I support the amendment. To impose the burden on local authorities of having to go through the hundreds of provisions covered by the Bill is unreasonable and it should not be imposed. I have looked at the guide to which we have been referred before and I see in paragraph 67 that the LBRO is going to do this. I wish it luck.
I have a copy of a letter from the noble Lord, Lord Jones, which he wrote to the noble Lord, Lord Goodhart, as chairman of the Delegated Powers and Regulatory Reform Committee, concerning the European instruments referred to in Clause 4. In the letter the noble Lord, Lord Jones, said:
“I believe that listing all the regulations whether in the Bill or by statutory instrument would be impractical: regulations under ECA 1972 are made very frequently and any list would very quickly be out of date”.
That relates only to European communities legislation by subordinate instrument; it does not take account of the copious new penalties that are imposed in primary legislation and which come from all kinds of departments over the whole range of government. The LBRO could probably do this but I would like an assurance that it will have the manpower and resources to do so and the lines of communication to all the government departments who create these penalties to make sure that it has covered the field.
I do not mind whether it is the solution of the noble Lord, Lord Jones, or the one in the guidance, but local authorities should not have to do this. They are not responsible for the great deluge of legislation that is put upon them to enforce and they are capable of missing some, as I fear I know. Therefore it would be very much better if it was done by a central authority.
I have some sympathy with the comments made and the intent behind the amendments. However, we do not believe that they are necessary.
I should start by explaining that the requirement in Clause 61 is to publish guidance and that the issue of burden and bureaucracy that has been mentioned is about who prepares that guidance ahead of publication. We believe that the regulators rather than the Minister should publish guidance about the way in which they will individually apply and enforce the provisions. This will provide regulatory certainty and clear lines of accountability to the regulated community who look to the regulators for this. Although we expect the relevant government department to have a role to play in preparing the guidance, we envisage that this will be a collaborative process involving the department, the regulator and, where appropriate, the LBRO.
It may be helpful if I outline some possible scenarios. Where there is a national regulator, we would expect that regulator to prepare and publish the guidance. If a national regulator is working in partnership with local authorities, such as on food safety, we would expect the national regulator to prepare the guidance in consultation with the LBRO and local authorities. The national regulator and the local authorities would then publish the guidance.
Where there is no national regulator, such as on environmental health or trading standards, we would expect the LBRO to take the lead in preparing guidance, working with the relevant government department and local authorities. Each local authority, as a regulator, would then be required to publish the guidance. This approach should help to reduce the workload for local authorities, to which the noble Viscount, Lord Colville, correctly pointed, and help to ensure consistency across the board. Indeed, that was the purpose of the structure that was set up.
In the light of what I have said, I hope that the noble Lord, Lord De Mauley, will feel able to withdraw his amendment.
Before the noble Lord decides what to do about the amendment, perhaps I may make what I hope is a helpful suggestion. There will be thousands of entries and each one will have to have the requisite enforcement procedure. Why not use a loose-leaf encyclopaedia, as some of the publishing houses do? It would be much easier to bring up to date and new pages could be simply inserted, but it would be necessary to leave plenty of room for new pages because there is no end to this business.
I thank the Minister for her response. I am very grateful to the noble Viscount, Lord Colville, for his contribution. The noble Baroness’s answer needs careful analysis but she will appreciate our scepticism. Her reply seems to point out the importance of our forthcoming Amendment No. 193, which, with any luck, we will get to shortly. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 163B to 163D not moved.]
Clause 61 agreed to.
Clause 62 agreed to.
164: Before Clause 63, insert the following new Clause—
“Compliance with regulatory principles
(1) The relevant authority may not make any provision under or by virtue of this Part conferring power on a regulator—
(a) to impose a fixed monetary penalty in relation to an offence,(b) to impose a discretionary requirement in relation to an offence,(c) to serve a stop notice in relation to an offence, or(d) to accept an enforcement undertaking in relation to an offence,unless the authority is satisfied that the regulator will act in accordance with the principles referred to in section 5(2) in exercising that power.”(2) In this section “relevant authority” means—
(a) in relation to provision made under or by virtue of this Part by a Minister of the Crown, the Minister;(b) in relation to provision made under or by virtue of this Part by the Welsh Ministers, the Welsh Ministers.”
On Question, amendment agreed to.
Clause 63 [Review]:
165: Clause 63, page 28, line 31, at end insert “the National Audit Office and”
The noble Lord said: We reach Clause 63, which, happily, provides for a review by Ministers of how all these powers are operating after they have been going for three years. Obviously I support that, but the question raised by my amendment is who should do the review. At the moment, the relevant authority, which is the Minister, or the Welsh Minister in the case of Wales, must consult such persons as they consider appropriate. I suggest that they should consult the National Audit Office and any other persons they consider appropriate. I hope that Amendments Nos. 165 and 166 achieve that.
I am a strong supporter of the National Audit Office. I think that it is a good institution and that it makes very good and thorough reports on the activities of the various departments. As a Minister, I found that it was a good and fair arrangement, and it has been going for a very long time. Therefore, as I said, I support it.
In a way, my amendment might be regarded as a bit of nationalisation, because the other persons might be outside government, whereas the NAO is obviously part of the central machine although not part of the Government—it is obviously very independent. Nationalisation is the way in which these things have gone. As a matter of fact, many years ago I was the private sector auditor of Leicester City Council—more accurately, I was auditor’s clerk, engaged in the audit of the council. That sort of thing disappeared long ago, and the NAO should be involved in the review, which is properly to be carried out after three years. I beg to move.
All government departments, as noble Lords will know, are expected to conduct a post-implementation review of any new legislation or policy initiative. Clause 63 puts this requirement on a statutory footing, and requires the review to take place within a three-year period. In conducting the review, the Minister will have regard to such issues as whether there are any obstacles to the use of the new sanctioning powers, whether the drafting of the order has caused any unintended consequences, or whether the way in which the sanctions have been implemented has created incentives to use particular sanctions.
The review will benefit both regulators and the regulated community, as it will ensure that any deficiencies in the order can be identified and put right. This is a one-off review. There is no requirement to conduct further reviews, although we would expect the Minister to monitor a regulator’s performance as part of existing governance arrangements.
On the specific detail of Amendments Nos. 165 and 166, the Bill requires the Minister to consult such persons as he thinks fit when conducting a review under Clause 63. This would not preclude the Minister from consulting the National Audit Office, which we all hold in high regard. Indeed, we expect this to be good practice. However, the NAO may not be the most appropriate consultee in all circumstances. Where the regulators in question are local authorities that are audited by the Audit Commission, the NAO will have no remit to decide how they have exercised the new sanctioning powers. The Bill is therefore deliberately silent on whom the Minister should consult.
As a result, I hope the noble Lord will now feel able to withdraw the amendment.
First, I am delighted that the Minister says that the Government will look into the unexpected consequences. We all know that the unexpected consequences of legislation are often extremely powerful; indeed, they are sometimes as powerful as the intended consequences. That is an extremely important element of the review, which, as I say, I welcome as a whole.
The NAO seemed to get a good press from the Minister. It was good practice to appoint the NAO. On the other hand, she was not willing to be definite and seemed to be steering in another direction. For the time being, however, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 166 and 167 not moved.]
Clause 63 agreed to.
Clause 64 [Suspension]:
168: Clause 64, page 28, line 41, leave out “direct” and insert “by order require”
The noble Lord said: In moving Amendment No. 168, I shall also speak to the amendments in my name and that of the noble Viscount, Lord Eccles. The amendments seek to address the fact that the Bill would allow Ministers to suspend legal powers conferred on the regulators and to revoke that suspension by direction, rather than by order. The original statutory instrument, which conferred the power in the first place, will remain even while the power is suspended. It will therefore not be possible to tell which powers are suspended by looking at the statute book.
As your Lordships’ Select Committee on the Constitution said in paragraph 6 of its report on the Bill which it published on 4 December last year:
“At any given time, primary and delegated legislation ought to show clearly which institutions—courts or regulators—may exercise sanctioning power in relation to criminal offences”.
In a letter to your Lordships’ Select Committee, the noble Lord, Lord Jones of Birmingham, noted that this provision was added following consultation on the draft Bill and is intended to act as a safeguard against a regulator’s persistent misuse of the new powers. The clause, he said,
“is intended to act as an interim, temporary measure that is designed to allow the regulator an opportunity to put right any failings. It will provide a practical and flexible alternative to full revocation of the legislative order”.
Under the Bill, the Minister will have to report any suspension or revocation of powers to Parliament, and the regulator will have to publish details of the direction. I respectfully submit that consideration should be given by the Committee to these amendments because they would require the Secretary of State to obtain parliamentary approval by order before suspending a regulator’s power or revoking that suspension, rather than allowing him or her to do it through simple direction. I beg to move.
I support these amendments. We think that the schemes established in the Bill will create an uncomfortable legal position. Rather like the image described by my noble friend Lord Cope of Berkeley when he spoke in an earlier Committee sitting of a patchwork high street with every shop having a different primary authority, so, as my noble friend Lord Goodlad tells us, the Bill’s outcome will be a patchwork of statutory instruments made by Ministers to empower some regulators to impose sanctions in relation to some offences. That sounds pretty confusing. The Bill will create a situation in which Ministers may at a later time suspend a regulator’s power to impose sanctions by issuing directions. They may then revoke that suspension by further directions. The Bill needs to set out clearly which institutions, courts or regulators may exercise sanctioning powers in relation to criminal offences, and which may not.
Given the views of the Select Committee on the Constitution, we fear that the arrangements in the Bill are at risk of being too complex and inaccessible to conform to one of the most basic requirements of the rule of law; that is, that all laws should be reasonably certain and accessible. I look forward to the Minister’s response.
The suspension power is intended to provide a safeguard against any improper use of the new sanctions and was added to the Bill in response to concerns raised by the business community during the consultation on the draft Bill. It is designed to be simple to operate either when removing or restoring sanctioning powers. The power will be exercised by the Minister who made the order giving the regulator access to the new sanctions. It is not intended that the power will be used to challenge a decision in an individual case of regulatory non-compliance. It is designed to tackle persistent failings by a regulator, and I should add that the reference to “an offence” in Clause 64 is not to individual cases.
In particular, Clause 64 is intended to act as an interim, temporary measure that is designed to give the regulator an opportunity quickly to put right any failings, but stopping short of full revocation of the order that gives it access to the new powers. Our fear is that subjecting this process to the affirmative resolution procedure, which would be the effect of these amendments, would offer little advantage over full revocation of the order. It would mean that a Minister would not be able to respond as quickly to address the serious misuse of the sanctions by a regulator, nor—more significantly—would a regulator be able quickly to regain the use of the sanctions once any such misuse had been addressed if each time it had to go through regulations laid in Parliament. As such, it is doubtful whether the suspension power would ever be used. It is not intended that it will be used often but, if it is necessary to come to Parliament each time, we wonder whether it will ever be used.
The Government have the utmost respect for the Select Committee on the Constitution, chaired by the noble Lord, Lord Goodlad. We are grateful to him for coming to the Committee today to move his amendment but our concern is that we disagree with the committee on this point. We understand its specific concern about the procedure for the suspension of the proposed new sanctioning powers. From what the noble Lord said, the intention behind the amendments is clear—to ensure that there is sufficient parliamentary scrutiny of any decision made by a Minister to suspend a regulator’s access to the powers.
Perhaps I may give some reassurance that, while the Minister’s direction will not be subject under the Bill to direct parliamentary oversight, the Minister will be required by Clause 64 to report to Parliament on any direction that he gives to a regulator either suspending or revoking suspension of the powers. There will have to be consultation before making any direction and the regulator will have to publish the details of the direction.
As has been said by all Members of the Committee, the Bill will allow regulators access to a range of important powers, and that is obvious from looking at the Bill. Some of the new sanctions could be particularly significant. Business needs to be assured that regulators will use these sanctions in a correct, consistent and proportionate manner and that, if they do not, their powers will be suspended, if only temporarily. That is why we think that this clause provides an important additional safeguard.
Our view is that the process outlined in Clause 64 gives those that are subject to the regulatory regime the transparency and certainty which the noble Lord’s amendments seek to provide. To make it a necessity for a Minister to come to Parliament and lay an order here would, in practical terms, make the suspension power very difficult to operate.
I put those views forward on behalf of the Government in the hope of persuading the noble Lord but, even if he is not persuaded, I hope that he will withdraw the amendment.
I thank the noble Lord, Lord Bach, for replying with his normal clarity and thoroughness. I should like to reflect carefully on what he said but, in the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 169 to 178 not moved.]
Clause 64 agreed to.
Clause 65 [Payment of penalties into Consolidated Fund etc]:
[Amendment No. 179 not moved.]
Clause 65 agreed to.
Clause 66 agreed to.
179A: After Clause 66, insert the following new Clause—
A regulator must publish a list on a regular basis of their completed enforcement actions and against whom such actions have been taken.”
The noble Lord said: As will be apparent to noble Lords who have sat through the Committee stage, we on these Benches support the implementation of the Macrory recommendations. The purpose of Amendment No. 179A is to introduce into the Bill the final Macrory recommendation that each regulator should, on a regular basis, publish a list of its completed enforcement actions, listing also against whom the actions have been taken. Therefore, the amendment would require regulators to make publicly available a simple list of when they have used the sanctions granted to them under Part 3. Macrory recommended that and examples exist of successes of this approach.
A live example of the reputational regulation is set out in pilot schemes sponsored by the Food Standards Agency. In the scheme, local authorities publish the details of food hygiene inspection results. If food retail businesses think that consumers will refuse to eat at restaurants with low food hygiene scores, their publication obviously provides a real incentive for them to meet acceptable standards. I do not want to go into the position in the United States, but it has taken the principle to a further level. But we know that compliant restaurants in the United States attract more business and the rates of food poisoning are decreasing. We therefore propose that this final Macrory principle should be in the Bill, and that is the purpose of this amendment. I beg to move.
I rise briefly to support this amendment. Publicity is the key to stopping other companies and organisations from falling into the same trap and being fined or otherwise taken to task by a regulatory body. About a year ago, Network Rail was fined something like £2 million for overstaying its possessions on Portsmouth signalling. While the fine was not that large, the effect on Network Rail was very significant, although I expect that it will be given a much larger fine over its problems during the Christmas holiday. Whether the company is big or small, it is important that people should know about the problem because more steps will then be taken to prevent it happening again.
I am not unhappy with this proposal, but I wonder if the noble Lord, Lord Razzall, could clarify a point for me. When he talks about completed enforcement actions, will this reveal where enforcement actions have failed because appeals have been successfully made against an action? I ask this because it seems very unfair for people to be listed if in fact appeals were made and the enforcement action was found not to be appropriate. People should be able to justify their actions, and indeed from time to time it would be a major sanction on the regulator acting capriciously.
I have no pride in the wording here. Clearly the intention is to publish a list of people where an enforcement action has been taken and is justified; that is the intention. If the Government are prepared to accept the principle, I am sure that those far better qualified than I will produce the appropriate amendment.
We are grateful to the noble Lord, Lord Razzall, and we agree that regulators should publicise the details of their civil enforcement activity. This will help to ensure transparency and could prove to be a useful tool in encouraging compliance from those keen to maintain their public reputation. We have sympathy with the amendment. He will understand that we want to take it away, consider it further and return to the issue on Report.
I am grateful to the Minister. As I always say on my amendments, he has much better draftsmen at his beck and call. I welcome his support and of course I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 67 agreed to.
Clause 68 [Duty not to impose or maintain unnecessary burdens]:
180: Clause 68, page 31, line 16, leave out “secure” and insert “keep the carrying out of that function under review with a view to securing”
The noble Lord said: We have come to Part 4, which is a late addition to the Bill after formal consultation was closed in August last year. Clause 68 imposes a potential duty on one or more regulators to secure that it does not impose any “unnecessary” burdens. But this duty on a regulator only comes into effect when a ministerial order is made under Clause 69 to bring Clause 68 into effect in relation to any particular regulator that the order specifies.
My noble friend Lady Vadera, to whom I am pleased to add my welcome today, and my noble friend Lord Bach know that various economic regulators—Ofcom, Ofwat, the Office of Rail Regulation and the Office of Fair Trading—have been active behind the scenes in securing the kind of changes to the Bill sought by my amendments. They are principally concerned that any new obligation imposed by this clause should not adversely affect their statutory duties under existing legislation.
I hope the Front Benches opposite have received copies of what Clause 68 would look like if all of my 11 amendments were accepted, otherwise it is rather difficult to follow the particular amendments on their own. The objectives of my amendments are threefold: first, to impose a clear obligation on regulators to keep under review their regulatory functions to ensure that burdens are not imposed which are unnecessary; secondly, to achieve legislative consistency in the statutory obligations imposed on the various regulators and, in particular, consistency between this Bill and Section 6 of the Communications Act 2003 that set up Ofcom; and, thirdly, to clarify the meaning of “unnecessary” burdens.
With regard to my first and second objectives, and especially that of consistency with existing legislation, the opening words of Section 6 of the Communications Act 2003 are:
“OFCOM must keep the carrying out of their functions under review with a view to securing that regulation by OFCOM does not involve … the imposition of burdens which are unnecessary; or … the maintenance of burdens which have become unnecessary”.
The guidance notes to the Bill before us state on page 50 that: “The duty”—in this clause—
“is modelled on Section 6 of the Communications Act 2003”,
“places a similar duty on OFCOM”.
I do not think it is very closely modelled on Section 6 of the Communications Act at all. I submit that Amendment No. 180 and the other amendments are much more closely modelled on it and therefore more in accord with the intentions of the Bill as stated by Her Majesty’s Government in their guidance, and closer than Clause 68 as it stands.
Under the current Clause 68, it is not clear whether a review by the regulator is actually required or is sufficient, or is merely one of several possible actions by the regulator. The regulators will be left in some uncertainty on the basis of the present clause. Lack of clarity is particularly inappropriate for the competition functions of the Office of Fair Trading and the other regulators because it might leave open the possibility of legal challenge in respect, for example, of the allegedly burdensome way—unnecessarily burdensome, it might be argued—in which investigations for the purposes of competition law are being conducted.
Hampton was keen on legislative simplification. It is not helpful if businessmen have to familiarise themselves with a variety of legislative provisions, all supposedly dealing with the same problem. Ofcom, in the four or five years that it has been in existence, interprets Section 6 of the Communications Act as requiring it to be constantly aware of the need to minimise regulatory burdens. That has influenced the culture of the organisation: from time to time Ofcom publishes details of progress in reducing regulatory burdens and plans to make further progress as set out in its December 2007 simplification plan. I know, because it is in the guide to the Bill, that the Government are keen on simplifications plans from regulators. They are expressly praised by Her Majesty’s Government on page 49 of the guidance.
On the third objective of my amendments, clarifying what is meant by so-called “unnecessary” burdens, I ask the Committee to take note of Amendment No. 185:
“In determining whether a burden is necessary or unnecessary for the purposes of complying … the person exercising the relevant function shall, when exercising that function, have regard to those matters to which they are required to have regard under or pursuant to any other enactment”.
Finally, while Clause 68(2) makes it clear that the duty does not require the removal of a burden where its removal would be “impracticable or disproportionate”, there is a need to cover similarly the imposition of new burdens. One of the economic regulators, Ofgem, occasionally has to approve changes to gas and electricity industry codes. They are pretty complex agreements which govern, for example, terms of connection with gas and electricity networks. Ofgem has no powers to alter or modify proposals that come from industry or from consumer representation; it must accept or reject them, and must judge them as a whole in the public interest. Under the current Clause 68, it is not clear that Ofgem can do that if the proposals involve imposing regulatory burdens of a new kind. Ofgem needs clarity to continue to do its work. At the moment, the clause could do with my Amendments Nos. 182 to 184 to ensure clarity about what is meant by “unnecessary” burdens and what the existing statutory requirements are, as well as those that the Bill seeks to impose. I beg to move.
I have enormous sympathy with the proposals in these amendments. Part 4 poses a significant issue for the Government. We on these Benches have taken the easy way out and have simply proposed that Part 4 should not stand part of the Bill rather than attempting to amend it in the learned way that the noble Lord, Lord Borrie, has done. It is a shame we have got to this point with regard to Part 4. The Government to some extent have fallen down on their own procedures. In draft, the Bill was well considered and well commented on by all interested parties. However, Part 4 was put into the Bill at a very late stage so the Government did not have an opportunity to consult on it as they did in their pretty detailed consultation on Parts 1 to 3. I am sure the Minister will accept that as a result of that consultation, those parts of the Bill are in a much better form than they would have been without it. The Government should take the opportunity between now and Report to think again about Part 4, either by taking on board our proposal to exclude it altogether or, if they do not wish to do that, by taking on board a number of the points made by the noble Lord, Lord Borrie.
The Food Standards Agency has been particularly vociferous in its opposition to Part 4 because it believes that these provisions could potentially limit a regulator’s ability to protect the public. The question whether a regulation designed to protect consumers is necessary—the noble Lord, Lord Borrie, touched on this—will always be hotly contested by organisations representing either the consumer or the business interest. The provisions in Part 4 may well be used by business organisations to put unreasonable pressure on regulators to remove essential consumer protection measures. Indeed, they might also give third parties too much control over the regulatory agenda and distract regulators from working on their key priorities.
My fundamental point, as I have indicated, is that it is a shame that Part 4 has appeared without the opportunity for proper consultation on it. We do not think that it is not in the right form and we hope that the Government will either accept what we suggest and delete it altogether or take on board the points that the noble Lord, Lord Borrie, has made and attempt to amend it in a more satisfactory manner.
Briefly, I support what the noble Lord, Lord Borrie, has said. The principal economic regulators have duties placed on them somewhere in the Acts which set them up to have minimum standards. They also have a set of public interest objectives. I am worried that the Government are seeking, in this and other legislation, to interfere in the independence of some of these regulators. They have not submitted much evidence that things are wrong now. This falls outside the general presumption that we are trying to ease the burden of regulation. In fact, one could interpret this part of the Bill as adding to regulation, not subtracting from it. It does at least make it very much more complicated.
I join my noble friend Lord Razzall in hoping that we may persuade the Government to take away this whole part of the Bill and look at it again, because doing so would not detract from the main purposes that they intend.
I shall speak briefly to my Amendment No. 191 and to the other amendments in the group. I support what my noble friend Lord Borrie and other noble Lords have said about Part 4, which clearly compromises the independence of economic regulators. I spoke about this at Second Reading, and I received a letter from my noble friend Lord Jones of Birmingham on 18 December—I hope all noble Lords received a copy—that tried to answer some of the points I made. My noble friend cannot say which regulators will be included in this part because they are to be specified by statutory instrument and he has not said when, how, and what are the criteria for choosing them, which is quite serious.
My noble friend Lord Jones stated that:
“It is not our intention that Part 4 should be used to frustrate the work of the regulator”,
but as another noble Lord said earlier, we are in the territory of the law of unintended consequences here. It may not be the intention, but it is quite possible that it will happen. My noble friend goes on to say:
“It is, of course, not possible to preclude vexatious complaints by a business”.
It is not, but if we did not have these two clauses, they would not arise. I get very worried about that.
I am also really worried about the big companies that are regulated, not the small ones that other noble Lords talked about earlier. The big ones have unlimited resources to put in complaints and frustrate the work of regulators, which is quite serious. That would undermine the competitiveness of UK business.
I have had many discussions with the Office of Rail Regulation and, as the noble Lord, Lord Bradshaw, says, it, along with the other economic regulators listed in my amendment, believes that the clause duplicates the duties that they have already. One of the existing duties on the ORR is to impose on operators of railway services the minimum restrictions consistent with the performance of their functions. Surely this is clear evidence of duplication. If it is in the original legislation—the Railways Act 1993— why duplicate it? We shall get into a terrible knot here.
Clause 69 allows the Government to interfere. I take very seriously the independence of economic regulators because they are the bedrock of getting private sector investment into the industries they regulate. We saw in the London Olympics Bill, although it did not matter too much there, and we can see in the Crossrail Bill, that the Government are trying two different approaches—one through legislation and one through an option agreement—to restrict the independence of the rail regulators to benefit the Government’s own finances. This is extremely serious. If these clauses remain, all regulatory decisions could be subject to re-opening if the Government are not satisfied with the result. That power completely takes away the independence of the regulators.
As I have said, the Bill is intended to implement the Hampton agenda. Phillip Hampton was careful to avoid compromising the independence of the economic regulators and that is why, as I understand it, he did not include these clauses in his recommendations. I hope that my noble friend will look again at these clauses. If the Government will not remove them both, perhaps the amendments proposed by my noble friend Lord Borrie, who is much more expert at this than I am, or mine, could be looked at again for the Report stage.
I should say to the noble Lord, Lord Borrie, that, unfortunately, the “as amended” version of Clause 68 did not arrive on my desk. However, having listened to him, what he says seems to be most sensible.
The intention of my Amendment No. 191A goes to a rather smaller issue than some that have been spoken to: it is to make certain that Part 4 applies only to regulators other than local authorities—that is, to national regulators and government departments and agencies as the makers of regulations.
Other noble Lords have mentioned that Part 4 of the Bill was not subject to consultation. The imposition of a regulatory burden is first and foremost applicable when new legislation or government guidance is issued that imposes the regulatory requirements. This is done by government departments, agencies and national regulators; not by local authorities, which are simply charged with enforcing the legislation or guidance that has been issued nationally. The exercise of regulatory functions and activities by local authorities and their performance in this regard is already subject to an established regime of overview and public accountability. This existing regime includes a raft of checks and balances to ensure that local authorities do not impose or maintain unnecessary burdens and that their use and application of regulatory powers is reasonable, proportionate, fair and accountable. Local authorities are already held to account in the exercise of their regulatory functions by a whole host of parties and processes and so the duty imposed by Part 4 is unnecessary for them. This part of the Bill should be amended so as not to apply to them.
Perhaps I may say an additional word before my noble friend responds to the debate. On the amendment of my noble friend Lord Berkeley to exclude a certain list of specific regulators, I feel that she may not be inclined to support the idea of an exclusion list. If that is her view, would she comment on the possibility of stating in the Bill which regulators Clause 68 is meant to apply to? If that clause is not amended as I suggest, I would rather it disappeared altogether.
I welcome this opportunity to discuss Part 4 and set it in the context of the whole better regulation agenda. The aim of Part 4 is to help regulators ensure that they do not impose or maintain unnecessary burdens and that they deliver an efficient regulatory system with greater transparency. The intention is to provide for more effective enforcement of the regulations that Parliament has decided should be created.
My noble friend Lord Borrie is right to say that this duty was not included in the draft Bill, but our intention to introduce it was highlighted in the Government’s document, Next Steps on Regulatory Reform, published in July. We had extensive meetings with many regulators throughout the summer and autumn. We listened to what they had to say and amended our proposals: for example, adding the provision on practicability and proportionality of the removal of unnecessary burdens in Clause 68(2). The Government do not intend that the regulators should, as a result of this duty, divert resources from their core function in a way that compromises their effectiveness or independence. We expect that, in reviewing their functions and removing unnecessary burdens, regulators should be able to target their resources more effectively and enhance the regulatory protections and outcomes.
Given the wide range of comments here, I will take the amendments in turn. The Committee will note that the duty is to secure that unnecessary burdens are not imposed or maintained. That requires a process of identification and planned action, and it is for the regulator, following a review of the burdens that it imposes, to determine those that are unnecessary. As set out in Clause 68(2), where it is practicable and proportionate to do so, the regulator must remove those burdens.
Amendments Nos. 180 and 181 would insert into the duty wording that would focus it on reviewing functions rather than on removing burdens. We accept that the duty should not require regulators to undertake an immediate review of all their functions nor to engage in endless detailed reviews of them. Nevertheless, we think that the impact of burdens on the regulator should be assessed on an ongoing basis. The aim is to require a meaningful review within reasonable time scales, and we will consider that part of the amendment. However, we feel that allowing the regulators to review, with a view to securing that unnecessary burdens are neither imposed nor maintained, would significantly dilute the duty and would not achieve the Government’s aim of better regulation. While that is the term of the duty to which Ofcom is subject, we are not here drafting a duty for Ofcom or indeed only for economic regulators, but rather one that would be applied to a diverse range of regulators. In light of that, I ask my noble friend to withdraw the amendment so that we may return to it on Report.
Clause 68(2) recognises that there might be legitimate reasons not to remove unnecessary burdens where it would be disproportionate or impractical. That provides a safeguard, which regulators asked for during our consultation with them, that unnecessary burdens could be maintained if it was not practical or the cost or effort would be disproportionate to remove them.
Amendments Nos. 182 to 184 would broaden that significantly to allow new unnecessary burdens to be imposed if not doing so would be impracticable or disproportionate. That is not necessary and would significantly widen the exemption to the duty. We considered it unattractive to specifically authorise the imposition of unnecessary burdens by regulators in the Bill. Again, I hope that will provide a basis for my noble friend to consider not moving these amendments.
Amendment No. 185 seeks to establish who determines what is an unnecessary burden. I have already said that it is for the regulator, following the review of the burdens it imposes, to determine what is unnecessary. That is clear from the current provisions. I hope that my noble friend will agree that the regulator must always have regard to its other statutory duties and consequently will understand that we do not feel that it is necessary to state that fact here.
With regard to the point made by my noble friend Lord Borrie about Ofgem, we are currently in discussion with it on ways in which its function might potentially sensibly be excluded from application of the duty where it has no discretion but to impose the burden.
Additionally, the guide to the Bill provides examples of what might be considered unnecessary, and it is intended that that will remain in the published guidance. What is necessary or unnecessary will be specific to the circumstances, and it would not be helpful or appropriate to seek to specify this matter in the Bill. However, we are willing to consider clarifying that it is the regulator who decides what is unnecessary following a review of its functions, and I hope that that will enable my noble friend to consider not moving this amendment.
The aim of Clause 68(3) to (6) is to provide transparency. The Bill has no other enforcement mechanism; action is leveraged by way of transparency. The provisions in the Bill require a regulator to whom the duty has been applied to publish a statement, as soon as is reasonably practicable, setting out what it proposes to do in the following 12 months about any unnecessary burdens that have been identified. Subsequent annual statements should also report on what has been done in the previous 12 months in connection with any unnecessary burdens that were identified on the previous statement, and should explain why a burden that is unnecessary has not been removed. Thus the report should look forward, as well as back to what has been done.
My noble friend’s Amendments Nos. 186 to 188 would dilute those reporting provisions by removing, first, the requirement to report on what has been done by the regulator since the previous statement and, secondly, the requirement to explain why unnecessary burdens have been maintained where it would have been impracticable or disproportionate to remove them. That would compromise regulatory accountability.
Amendments Nos. 189 and 190 would introduce the ability to revise a statement in the period to which it applies. Although it may be unpalatable for a regulator to report that progress has been less than expected, we believe that such transparency is essential. Allowing regulators to produce a revised statement part-way through the year could effectively allow inconvenient goal posts to be shifted.
We acknowledge that the Bill requires regulators to have regard to the statement throughout the period to which it relates. If the regulatory environment changes during that period, they will be able to take that into account in their statement. The extent to which they justifiably depart from the statement can be reported in the next statement.
The Bill allows regulators to publish a single statement every 12 months in the manner that is most appropriate to them; for example, in annual reports. I trust that the Committee agrees that there is nothing to be gained from requiring a duplication of statements, especially from those regulators that already produce annual reports about their regulatory improvements.
My noble friend Lord Berkeley, in his Amendment No. 191, seeks to exclude a number of economic regulators from having the duty applied to them at all, ever. I thank my noble friend for the opportunity to say what we believe this part should not capture. Some regulators—in particular the Office of Fair Trading, the Competition Commission and some economic regulators—have expressed concern that the potential application of the duty to some of their regulatory functions might undermine their effectiveness.
Let me assure them that we do not intend the power to be exercised over their competition functions in a way that would give scope to undermine or second-guess their decisions in competition and merger cases. Consequently, we do not see a case to apply the duty to the Competition Commission. However, the clause provides an avenue for implementing a recommendation made by the Select Committee in its recent report on economic regulators that:
“economic regulators be statutorily required to facilitate the competitiveness of UK firms by ... removing regulatory burdens from firms wherever possible”.
I am very sympathetic to the view expressed by my noble friend Lord Berkeley about the perceived infringement of regulatory independence, should a Minister decide to apply the duty to those regulators listed in the amendment. The power does not allow a Minister to direct the operational decisions of a regulator; it only allows a Minister to require the regulator to conduct a review of the burdens that it imposes in exercising the regulatory functions listed in the order, and to act on the findings of the review. Nevertheless, I am grateful to my noble friend Lord Borrie for his suggestion that we apply the duty in Part 4 to economic regulators in the Bill. That will be one way to address the concern about independence. We would like to take that point away and consider it. I suggest to the Committee that we come back to it on Report.
I am very grateful to my noble friend. On a point of clarification, my amendment would not exclude the five regulators completely from this section; it would exclude them from the involvement of a Minister of the Crown giving instructions or directions. That is because when the Government have financed an investment subject to a regulatory decision—nothing to do with competition—it could be seen to be compromising the independence of the regulator if the Government are not satisfied and use the imposition of the duty as a threat. That is the reason: I am not looking to have them removed completely, only to remove the government involvement in Clause 69.
I take my noble friend’s point, and I hope that his concern will be addressed by the suggestion made by my noble friend Lord Borrie.
I refer to Amendment No. 191A, tabled by the noble Lord, Lord De Mauley, which would exclude local authorities from ever having to have that duty applied to them. The Government’s view is that the duty should be able to be applied to any person carrying out a regulatory function where it would further the better regulation agenda to do so. We are not convinced that local authorities should be exempt from even the potential application of the duty for all time. Although we accept that local authorities are already subject to overview, as LACORS suggests in its briefing, the duty, which is specifically targeted at the removal of unnecessary burdens, could provide some additional focus. In his review, Hampton established that around 80 per cent of regulatory inspections are carried out by local authorities, and are a source of significant irritation to businesses.
The Committee need only refer to Schedule 3 to see the numerous and diverse Acts of Parliament already referred to that local authorities enforce. It is possible that unnecessary burdens result from local authority regulatory activities and, on that basis, I hope that the Committee agree that we would not want to give the impression that this part has no relevance. In the light of that, I hope that my noble friend will be able to withdraw his amendment.
My noble friend has given me a very full reply. No doubt it will take me some time with my advisers to consider her reply fully to see what I ought to do at the next stage.
I am bound to say at this stage that I was much impressed by the speeches of the noble Lords, Lord Razzall and Lord Bradshaw, and my noble friend Lord Berkeley. One thing that they emphasised was the importance that the regulators see in the independence of Ministers. When there are hints in the drafting of Clause 68 that independence would be prejudiced, the regulators will continue to be concerned, despite the detailed reply of my noble friend.
A couple of points that she made struck me. More than once she mentioned that it is for the regulator to determine what constitutes an “unnecessary burden”. But there will be people out there, businessmen, who think that the way in which a regulator has exercised his powers is burdensome. When the regulator is under a duty that is put in this bold and bald way in Clause 68, it is a matter of concern. I said that Clause 68 as it stands is not based on the model of Section 6 of the Telecommunications Act, despite what the guidance says, because it talks about Ofcom having a duty to “review” not “remove” unnecessary burdens. That is a different matter. Ofcom in particular will notice the difference.
Although assurances from Ministers are often all that a person moving an amendment from whatever part of the Committee can reasonably expect, the assurance of my noble friend that competition powers were not intended to be got at here is all very well; but what is that worth when one of the regulators determines to investigate and there is the possibility of some huge fine involving millions that can be 10 per cent of turnover? The businessman will not be much impressed by an assurance by the Minister on what the clause was intended to mean if he can arguably argue in court that “unnecessary burdens” include the unnecessary way in which he has been treated by a competition authority and it is not possible by ministerial assurances for the legislation to be altered or to be interpreted solely in that way when it gets before a court in judicial review proceedings.
Even on a preliminary hearing of what my noble friend said—although it is a pleasure to have her here and I am sorry to raise such an unnecessary burden for her—my advisers will not be terribly pleased with her response; but we will look at it. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 181 to 190 not moved.]
Clause 68 agreed to.
Clause 69 [Functions to which section 68 applies]:
[Amendment No. 191 not moved.]
Clause 69 agreed to.
[Amendment No. 191A not moved.]
Clause 70 agreed to.
Clause 71 [Extent]:
192: Clause 71, page 33, leave out line 13 and insert—
“(1) Part 1 of this Act extends to England and Wales
(2) Parts 2 to 4 of this Act extend to—
(a) England and Wales(b) Scotland in respect of reserved matters;(c) Northern Ireland except in respect of transferred matters(3) Part 5 of this Act extends to the United Kingdom.”
The noble Lord said: We come to Part 5 of the Bill. It is a slim but important part and Amendment No. 192 seeks to strike a blow for clarity, candour and consistency. As the noble Viscount, Lord Colville of Culross, reminded us an hour or so ago, consistency is at the heart of the Government’s objectives for this Bill.
My amendment seeks to replace Clause 71, which currently reads:
“This Act extends to England and Wales, Scotland and Northern Ireland”.
To the non-legal reader, that is a travesty of the reality: it flatters to deceive. It is hung around the legal distinction between extent and application—something with which Sir Humphrey Appleby would have been pleased to bemuse the luckless Jim Hacker with in the television series. That it is extremely difficult is reflected in the fact that it takes up a page and a half—paragraphs 12 to 19 inclusive—of the Explanatory Notes. Even there, the drafting is extraordinarily obscure in that paragraph 17 says:
“Parts 2 to 4 apply in Scotland but only in respect of reserved matters”,
and paragraph 19 says:
“Parts 2 to 3 apply in Northern Ireland but not in respect of transferred matters”.
It would be very difficult to find a way to make that harder to understand. However, these Explanatory Notes will disappear and we will be left only with the Bill. Therefore, my amendment seeks to reflect in the Bill what is in the Explanatory Notes by making it clear that only Part 5—itself a very slim part of four short clauses—applies to the United Kingdom as a whole. This is not just about appearances or the niceties of parliamentary draftsmen; I wish that it were. It is about the candour of the Government’s approach.
The Bill claims to be about local better regulation but nowhere have the Government accepted that. In fact, a proper and more accurate title for the Bill would probably be “The England and Wales Local Better Regulation Bill”.
If they do their job properly, the bulk of the work for LBROs will be on devolved or transferred matters. As such, we do not have a UK-wide level better regulatory playing field; we have potentially three different levels of better regulation. I have looked in vain for any acknowledgement of this grey weakness by the Government. Far from it—in fact, rather the reverse. On 28 November in our Second Reading debate, the noble Lord, Lord Jones of Birmingham, said:
“Local authority enforcers sit at the centre of a system that has grown up over decades within a framework set by multiple government departments, initiatives and regulators. It is a very complex system and, because of this very complexity, it has not always been as effective as it might have been. Parts 1 and 2 of the Bill aim to strike a careful balance by ensuring that the legitimate expectations of business are met within the system while at the same time ensuring that local authorities retain the freedom and flexibility that they need to get on with doing their job effectively”.—[Official Report, 28/11/07; col. 1239.]
To make this claim without mentioning the exclusion of Scotland and Northern Ireland is extraordinary and, indeed, it strikes at the strategic purpose of the Bill.
Worse still, I am afraid that the Government know that that is the case. The noble Lord, Lord Bach, and I have had discussions in this room about a parallel example, which we already have, of how the absence of a UK-wide level playing field can lead to difficulties. He and I discussed at some length the issue of charity law. Charity law is a devolved, not reserved, matter. The Charities Act 2006 is administered in England and Wales by the Charity Commission but there is a separate charities Act for Scotland, which is administered by the Office of the Scottish Charity Regulator—OSCR. These two authorities are now producing different regulations for England, Wales and Scotland. This has posed enormous problems for national charities. After some considerable discussion, the noble Lord was prepared to write to me, which he did on 17 December, placing a copy in the Library. He said:
“However, the introduction of a new regulator in Scotland has created an additional burden that did not exist before for charities operating there, and whilst the legal frameworks are similar, the different Parliamentary routes have inevitably led to some differences”.
We are heading for precisely the same result here. We have no co-ordination, leading to extra administrative burdens on firms which are operating on a UK-wide basis.
So what solution do I see? Some time ago, when we discussed Clause 12, the possibility was raised of the LBRO building relationships with regulators through Memorandums of Understanding. I hope that we can find a way for relationships with Scotland and Northern Ireland to be dealt with in this way. I would like the Government to say that they are not going to introduce these provisions until they have reached agreement with the Scottish and Northern Ireland regulators so that we can have a level playing field. Without that, a large measure of the grand strategic design that the Government have set out for the Bill will fail because they have not thought through how it will work in a devolved structure.
If the Government are not going to do that, let us at least have candour and honesty about how and where the Bill will apply and how it will operate. This is half a loaf only but it is better than the present situation, when we are being almost economical with the actuality. I beg to move.
I support my noble friend’s amendment. To the lay businessman, the obvious place to look in an Act of Parliament to see whether it applies to him, at least by virtue of geography, is in the section entitled “Extent”. Clause 71 suggests that the Bill applies uniformly across the whole of the United Kingdom. As my noble friend said, that is misleading.
I should not be surprised that the noble Lord, Lord Hodgson, has raised this point and we are grateful to him for doing so.
The stakes have been raised too high over this issue, so let me explain what we are doing. Part 1 of the Bill applies only to England and Wales. This is achieved by the definition of “local authority” in Clause 3. Parts 2, 3 and 4 of the Bill apply to England and Wales in respect of all matters, including matters for which Welsh Ministers have responsibility; they apply to Scotland in respect of matters that are reserved; and to Northern Ireland in respect of matters that are not transferred. The extent of the Bill as a whole, as provided in Clause 71, is England, Wales, Scotland and Northern Ireland.
The noble Lord, Lord Hodgson, knows better than me that the terms “Extent”, referred to in Clause 71, and “Application” have different legal meanings. Let me explain what those meanings are. “Extent” relates to the jurisdictional reach of legislation; “application” relates to its geographical reach. All parts of the Bill must extend to all jurisdictions—England, Wales, Scotland and Northern Ireland—although the parts apply differentially throughout the United Kingdom. For example, while Part 1 does not apply except in England and Wales, it must extend to Scotland and Northern Ireland because the LBRO, which has functions in relation to Scotland and Northern Ireland under Part 2, is subject to certain general duties and obligations under some provisions in Part 1. I refer the Committee to Clauses 13 and 14.
The application of each part of the Bill is set out. In Part 1, Clause 3 defines a local authority in England and Wales; in Part 2, Clause 21, which deals with the definition of “local authority”, includes a local authority in England, Wales, Scotland and Northern Ireland; in Part 3, Clauses 54 and 55 exclude Scottish devolved and Northern Ireland transferred functions; and in Part 4, Clause 60 does not apply to Scotland in respect of devolved functions, and to Northern Ireland in respect of transferred functions. It does not require a genius to realise that the Bill therefore extends to all the countries of the United Kingdom, but its application is limited to different parts of the United Kingdom depending on which part of the Bill we are talking about. I do not think that anyone who will have to use the Bill will be fooled into thinking, as has been suggested, that because Clause 71 puts this as it does that it somehow applies in every regard and every respect to all parts of the United Kingdom. Those who study and know the Bill will surely realise, simply from looking at the clauses to which I have referred, what we mean by Clause 71.
Let me assure the Committee that it is essential that the Bill should extend legally to all UK jurisdictions, even though the application of Part 1 is restricted to England and Wales. The Bill is drafted in a way that reflects and respects the devolution settlement. I cannot help but think that somewhere in the amendment is an element of not liking the devolution settlement very much—the settlement that concerned Wales, Scotland and Northern Ireland. I should say straightaway that I know the noble Lords, Lord Hodgson and Lord De Mauley, are trying only to make life easier for those who have to use the Bill, but I argue that that is clear from the Bill itself and that nothing in Clause 71 is in any way false, which seems to be what the noble Lord, Lord Hodgson, suggested.
I am grateful to the Minister although I am disappointed that he should suggest that my question is somehow an attack on the devolution settlement. If I may say with great respect at the end of a rather long day, that is an unworthy suggestion. I made no reference at all to anything to do with the Scottish Parliament or, indeed, the Northern Ireland Assembly; that is not part of what I am trying to do. I am trying to clarify the Bill and the fact that the Minister had to read an extensive and quite confusing brief to explain how the Bill applied shows that it is not easy to understand. If he could see the point that I was driving at, which is to make a relatively short amendment to Clause 71, clarity could be achieved not only for the legal cognoscenti but for someone looking at the Bill as a lay man. At the moment, the clause is very confusing for the lay man. I am extremely disappointed that he could not even bring himself to accept that. A lot more could have been done to make this particular law accessible and understandable.
I shall certainly take half a loaf off the table immediately. I thank the Minister for his reconsideration. I did not know that I could be so persuasive; I must try more. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 71 agreed to.
Clause 72 [Commencement]:
[Amendments Nos. 192A and 192B not moved.]
193: Clause 72, page 33, line 17, at end insert—
“( ) This Act shall cease to have effect on 1st January 2010 unless the Secretary of State provides by order that any provisions which are in force shall continue in force after that date.”
The noble Baroness said: The amendment proposes a sunset clause which will make the Local Better Regulation Office, the primary authority partnership and all that this Bill proposes cease by 2010. It is a fitting amendment with which to close our discussions in Grand Committee because it is emblematic of how we on these Benches have approached the Bill. The noble Lord, Lord Bach, has asked me again and again whether I support it. The answer is that while I like the sound of its stated aims—its promise to deliver consistency, transparency, accountability and proportionality—I do not think that it will be able to realise all these. In the past five sittings, and even in the past five minutes, we have heard about the difficulties.
If Her Majesty’s Government are hell bent on pursuing the Bill, it is essential that the Local Better Regulation Office and all that goes with it should start out as a pilot scheme that can be reviewed and then dissolved if the worst fears of many noble Lords turn out to be true. To create an inefficient and ineffective body is dangerous enough, but to sustain it so that it can inflict long-term damage on an already failing regulatory system is dangerous indeed. However, if the Local Better Regulation Office surprises us all, it can continue in its good work of better regulation, something we are desperately in need of and which of course we support. I beg to move.
I rise with some trepidation to support Amendment No. 193 in the name of the noble Baroness, Lady Wilcox. I say that because clearly I unwittingly upset her earlier in the proceedings. All I can do is offer my profuse apologies. It goes to show that attempted wit can backfire and upset people. I hope that she will allow me to support her amendment.
It will come as no surprise to noble Lords that we on these Benches have consistently argued for sunset clauses in legislation and regulations. We are happy to support the amendment and I am absolutely delighted that the noble Baroness, Lady Wilcox, has tabled it.
It might surprise some noble Lords to learn that in principle I, too, am a great fan of sunset clauses. I have championed them in the past and I will do so in the future. It is a provision that we look at case by case. Nevertheless, I do not think that such a clause would be applicable here. Sunset clauses are for where legislation includes proposals designed to address time-limited issues where specific requirements might become out of date, and where there is a focus on a certain set of measures based on market conditions that might change as those markets develop. Neither of those applies here.
As the noble Baroness, Lady Wilcox, has said, the purpose of the Bill is to create certainty and consistency, and to reduce regulatory burdens. A sunset clause that is intended to create less regulation over a period of time would have the opposite effect in this case. The Bill is intended to deliver benefits to business and we believe that it will do so. A sunset clause would create huge uncertainty, and indeed would be resisted by business, as we have been told repeatedly by representatives. However, I assure the noble Baroness that we understand the intention behind the proposal, which is to create a requirement to review whether the legislation is achieving its objectives. I should like to reassure her that the Bill has ample provision for ongoing review of the way in which it will be implemented.
Clause 17 in Part 1 confers on the Secretary of State the power to provide for the dissolution of the LBRO, which is to be used when it is deemed that the office has achieved its objectives, or indeed has not done so. As we discussed earlier today, Part 3 places a duty on the Minister to make an order to conduct a post-implementation review within three years. Additionally, Clause 64 in Part 3 is a suspension clause that enables a Minister making an order to confer sanctioning powers on a regulator to be able to direct it, not to issue any further sanctions where there is clear evidence that that regulator has persistently failed to act in accordance with its duties under the Bill. I hope that with these safeguards we have addressed the intent behind the amendment and that the noble Baroness may feel able to withdraw it.
I thank the Minister for her explanation of why she does not think that in this instance a sunset clause would be appropriate. This is the third piece of regulatory legislation to pass through Parliament since 2000. The other two have been disappointing and have caused layer upon layer of confusion for people to cope with. We are very worried that this is yet one more layer. No consolidation has taken place. As the Minister explained, the Government are themselves nervous because we already have the provision in Clause 2 for the possible dissolution of the LBRO, and she mentioned other things.
Of course, at this stage, we cannot press the amendment but I am sure that the Liberal Democrats, who have been keen on trying to get sunset clauses enacted for some time, will feel, like me, that we will want to think again about this matter and possibly return to it on Report. Looking at what the Government are doing, we are on the way, and perhaps with a better argument or a little more push, we may be able to get a sunset clause on Report. At this stage, I thank the noble Lord, Lord Razzall, who kindly supported the amendment with the most elegant of language, of which I approve, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 72 agreed to.
Clause 73 agreed to.
Bill reported with amendments.
The Committee adjourned at 7.17 pm.