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Regulatory Enforcement and Sanctions Bill [HL]

Volume 700: debated on Wednesday 19 March 2008

Consideration of amendments on Report resumed.

Clause 29 [Inspection plans]:

45: Clause 29, page 14, line 15, leave out “Where” and insert “Before”

The noble Lord said: My Lords, Clause 29 will play an essential role in encouraging a more co-ordinated, strategic and consistent approach to local authority inspection of multi-site businesses. Inspection plans will present a primary authority with the opportunity to share with all other local authorities its strategic knowledge of the businesses with which it has a partnership. It is our expectation that primary authorities will be experts in the operation of the businesses that they partner and in particular will have detailed knowledge of compliance and quality assurance processes.

A primary authority will know those areas where a business presents a low risk, where it has a strong record of compliance, where it has improvements in hand and where improvement is needed. To give a primary authority an evidence base to develop this expertise, we believe that when an enforcing authority departs from the recommendations in an inspection plan it must inform the primary authority of this departure and give reasons for it.

It was said in Committee:

“If businesses and primary authorities are to go to the expense of drawing up agreed inspection plans, it is not reasonable for local enforcing authorities to be able to disregard those plans without having to justify that”.—[Official Report, 28/1/08; col. GC 256.]

We agree with that and understand that businesses in particular will expect that they should not be subject to arbitrary inspections based on spurious grounds when an inspection plan has been drawn up. With this in mind, we believe that it is more appropriate for local authorities to notify the relevant primary authority when they depart from the recommendations in an inspection plan before the inspection is carried out. That is what Amendment No. 45 will do. I beg to move.

On Question, amendment agreed to.

46: Clause 29, page 14, line 15, leave out “exercises” and insert “proposes to exercise”

The noble Lord said: My Lords, Amendments Nos. 46 and 47 aim to ensure, without excessively eroding the powers of local authorities, that the primary authority is useful and effective and that multi-site businesses are keen to enter into such arrangements. Government Amendment No. 45 is very welcome and goes some way towards satisfying us, but it does not explain what happens next. Under the Bill as drafted, a primary authority and the business for which it is the primary authority will draw up an agreed inspection plan relevant to the company. This is intended to be a painstaking activity that goes to the heart of the business and its operations. It will take time, effort and resources on both sides—business and the authority. The plan will then have to be agreed with the LBRO and be brought to the attention of local authorities, which will be obliged to have regard to it.

It is in the event of a disagreement with this plan by a local enforcing authority that the problem arises. As drafted, even following government Amendment No. 45, the Bill means that the local authority will need to notify the primary authority before it undertakes an inspection outside the terms of the plan and to give its reasons for doing so. But that is the end of the matter. If the plan can simply be ignored, or if that is the perception, our contention is that that will undermine the value of drawing up the plan in the first place. The odd thing about how the Bill is drafted is that this is in contrast to what happens when a local enforcing authority wishes to take enforcement action against a business. In that event—and perhaps the Minister can confirm this—it must notify the primary authority and the primary authority can direct it not to take the action if it is inconsistent with advice that it has previously given the business, subject to appeal to the LBRO.

So we have a situation where the primary authority cannot veto the inspection but can then veto any enforcement action that arises as a consequence, thus rendering the inspection a waste of both the local authority’s and the business’s time. Even more than that, it might be argued that an inspection plan, agreed with a business, constitutes advice to the business on its procedures and that the primary authority has an obligation to reject any proposed enforcement action taken following rejection of the advice in the inspection plan. We have to remember that an inspection plan is about regular inspections. It is not about an inspection that is to follow up a specific complaint or suspicion of an offence having been committed. That is an enforcement activity over which the primary authority actually has a veto. In any event, the inspection plan could make provision for such one-off inspections and there is no reason to believe that a professional primary authority would reject a proposal for an inspection outside the plan if there were good reason for it. That is not the point.

What we want to deal with is the situation where a local authority is, for no good reason, simply disregarding a plan that every other authority is going along with. Our amendment is an attempt to bring these procedures into harmony and to enhance the workability and effectiveness of the whole primary authority principle. It would do so without undermining the ultimate authority of the local enforcing authority. That local enforcing authority would advise the primary authority of its desire to conduct an inspection outside the plan in advance. The primary authority could agree, as it may well do if the reasons are satisfactory, or it could disagree, with reasons, and ask the local authority to review its decision. The local authority could decide not to go ahead or it could decide to go ahead. In the latter case, it would have to advise the primary authority, which might then suggest that it agrees to let the LBRO arbitrate. A local authority that is certain could agree but, at the end of the day, it could still go ahead if it insisted. We do not envisage that this would be a long drawn-out process. Rather it should be a matter of days with a streamlined procedure. I beg to move.

My Lords, I believe that the noble Lord, Lord De Mauley, and I have largely the same intentions in our amendments. We are both trying to facilitate discussions between enforcing authorities and primary authorities before an inspection takes place; to give primary authorities the opportunity to share with enforcing authorities their knowledge and expertise; to give primary authorities the opportunity to inform the approach taken by an enforcing authority to an inspection; and to allow primary authorities to demonstrate, where appropriate, that an inspection is just unnecessary.

We do not think that primary authorities should be required to consent to inspections proposed by an enforcing authority, because inspections can be triggered by a wide range of factors, including a complaint that must be followed up and recurring management failings within an outlet that must be addressed. We do not think that an inspection plan can take into account all these factors. If an enforcing authority has to seek the consent of the relevant primary authority before undertaking an inspection, the result will be a deluge of notifications to the primary authority, bogging down the primary authority’s system as a whole and preventing quick inspections when these are needed. To avoid this outcome, primary authorities would naturally be likely never, or very rarely, to contest proposed inspections. Primary authorities would also draw up high-level inspection plans hedged with so many caveats as to render them meaningless. We do not think that disengagement between a primary authority and an enforcing authority would benefit anyone, particularly not businesses.

The noble Lord asked why there are different provisions for inspection and enforcement. Inspection is a different animal from enforcement. It imposes far fewer burdens on the business than an enforcement action does and we think that it would be disproportionate to require anything more than informing the primary authority. We do not think that consent is necessary. We fear that, although these are well intentioned amendments, their tendency would be to undermine the expected benefits of inspection plans. For that reason, I urge the noble Lord to withdraw them.

My Lords, I think that my case stands and I am not entirely convinced by the Minister’s response, as he will not be surprised to hear. But in view of the hour, I will not press the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 47 not moved.]

48: After Clause 33, insert the following new Clause—

“Conduct of local authority functions

Notwithstanding any provision of this Part, each local authority shall carry out its relevant functions in a fair and even-handed way with respect to all those carrying out regulated activities within its area.”

The noble Lord said: My Lords, this returns to the problem of the patchwork created by the legislation. The noble Lord, Lord Jones, in one of his visits to the Grand Committee, agreed that the patchwork has changed. Until this legislation, there was a patchwork effect across the branches of large organisations. Branches in different towns might be subject to different regimes from the different local authorities. Now all that is to end by statute as the agreements are put in place. The patchwork will be along the high street or within the trading estate, if noble Lords see what I mean. Different local authorities will ultimately be the primary authorities for different businesses spread around the trading estate or high street. The regulations can potentially be enforced differently.

As I said earlier, much of this is going on voluntarily at the moment. The Bill would put that aspect into statutory form. But statutory form is very different from voluntary form because of the compulsion involved and because the courts may get involved in arbitrating and making decisions about how the provision works, looking back to the legislation that we are passing. My new clause would ensure that, if a number of shops in a high street were being regulated in a particular way as a result of primary agreements elsewhere, a different, more rigorous regime could not be imposed on the independents to the detriment of their trading position. Each local authority should carry out its relevant functions in an even-handed way with respect to all those carrying out the regulated activities within each area—not only those regulated through the primary authority system, but the others.

I have referred to this point on a number of occasions both today and in Grand Committee. This is an attempt to place a legal constraint on the way in which local authorities exercise their functions so that, if a small business feels that it is being discriminated against on this basis, it will have the opportunity to appeal and say, “It’s not fair. The big businesses either side of me are not being regulated as toughly as I am”.

In moving this amendment, I am conscious that, from time to time, electoral pressures are very great on local authorities. For reasons that are often but not always good, there is pressure on the regulators to produce results that show that the public are being protected. The only people whom they can lean on once this is in statutory form are the independent businesses. Those are the people whom I am worried about and this new clause would prevent that from happening. I beg to move.

My Lords, I support my noble friend’s important amendment, which stipulates the need for fair jurisdiction in light of the primary authority partnership principle proposed by the Bill. I will not repeat the debates voicing the many concerns over the primary authority partnership that dominated so much of our time in Grand Committee, but I reiterate the nervousness on these Benches that the primary authority principle may lead to unfair or prejudiced treatment against smaller, especially single-site, businesses. The Minister will, I am sure, assure us that we need not worry about that, but the insertion of this clause would provide an even better assurance.

My Lords, I support the insertion of this new clause. There are five requirements for better regulation, which include proportionality and targeting. Proportionality is obviously enormously important. Targeting is more worrying. The Minister will be aware that targeting over the past 10 years has in some areas got a bad name for the unintended consequences that it has produced. As my noble friends Lord De Mauley and Lord Cope said, pressures can sometimes be brought to bear. There can be political pressures to try to achieve one thing over another. This is a salutary reminder that, if the Bill goes through as drafted, immense powers will be given to probably tens of thousands of officials in local authorities and regulatory authorities up and down the country. The importance of even-handedness can hardly be overemphasised.

My Lords, the noble Lord, Lord Cope, has made clear since Second Reading his concern to ensure that the Bill does not work against the interests of independent businesses and, sometimes, smaller businesses. I am confident that, far from doing so, the Bill will bring better and more consistent standards of enforcement for all businesses. We know that local authorities are under a duty to have regard to the principles of good regulation, under the Legislative and Regulatory Reform Act. Clause 5 of this Bill would require that the LBRO works to ensure that local authorities carry out their regulatory activities in the same way.

Part 2 will work to bring greater consistency to the treatment of businesses operating across more than one local authority. Consistency in other respects is also important, not least consistency between businesses. Promoting consistency between businesses, in this sense, will be just as much a part of the LBRO’s work. Its power of giving guidance to which local authorities must have regard will be its most effective tool in this instance. The primary authority scheme will not interfere with those areas where local discretion is necessary. It will promote consistency in areas where there is simply no good reason why standards should not be the same across the country.

Businesses have spoken to us about the very substantial costs they face where standards differ. In such cases as the brand name on a line of clothing, a method of preparing rice for cooking, or the kind of footwear necessary for staff working in a specific type of warehouse, an approach that was unproblematic from the home authority’s point of view was challenged elsewhere. There is no good reason why, in cases like these, standards that are acceptable in one part of the country should not be equally acceptable in another. That is why businesses, including the Federation of Small Businesses, so overwhelmingly support the aims of the Bill.

The main issue put to us by smaller businesses during the consultation was not that they disliked the primary authority scheme in principle. In fact, many smaller businesses operating over a handful of local authorities face problems of consistency themselves, and will benefit from it directly. Their concern was that local authority resources would be diverted away from them. We included a cost-recovery clause in the Bill, which we believe has removed that risk completely.

The Bill foresees, and deals in paragraph 7 of Schedule 4, with the risk that enforcement practice may diverge between businesses as primary authorities give subtly different advice on compliance by conferring on the LBRO the right to give guidance and, if need be, directions relating to specific actions which have been subject to arbitration. That is, lessons learnt from particular arbitration cases can be disseminated more widely to all businesses and local authorities if necessary.

The noble Lord and others who have spoken are concerned that local authorities must be even-handed. I ask the House to remember that local authorities are under a duty to be proportionate under the Legislative and Regulatory Reform (Regulatory Functions) Order 2007. We referred to levels of inspection for independent and multi-site businesses. The accusation is that inspection plans will somehow give multi-site businesses an unfair advantage. The inspection plans will not mean that multi-site businesses will somehow get less inspection; they mean that their inspection will be focused on known strategic problems for that business. We believe that they will improve the level of service that local authority enforcers will be able to give their communities just by improving the information available to inspectors.

Finally, on the “patchwork” issue that the noble Lord, Lord Cope, is concerned about, there will be different standards in some areas, but we do not think that that will affect matters which really count for local people. In fact, the residents of local authorities everywhere will benefit from much better intelligence-sharing between councils, which will focus the energies of their local authority enforcement officers on the important issues associated with multi-site firms. If need be, the powers of direction in Schedule 4 will allow the LBRO to bring more consistency between and within businesses. We do not believe that the extremely well meaning amendment of the noble Lord is necessary because of the way in which this system will work.

My Lords, the noble Lord has confirmed what I said at the start of our debates this afternoon—that this office is the national office for regulating local government regulators. I shall not pursue that.

This new clause is intended to be a safety net for smaller businesses, as was recognised in the debate, because I am conscious from my experience in Parliament and in government that, due to the law of unintended consequences, the way in which things work out in practice is not always what was intended by the legislators at the time. But the Minister conceded earlier that, as there is to be a review before long so that we can see how this is all working, the unintended consequences can be considered at that time, if they exist and if my fears are realised. In the light of that, I will not press this safety-net clause at this time and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 35 [Power to make orders providing for civil sanctions]:

49: Clause 35, page 15, line 29, leave out paragraph (a)

The noble and learned Lord said: My Lords, in moving the amendment, I shall speak also to the other amendments in my name—Amendments Nos. 50, 51, 52, 55, 60 and 63.

Amendments Nos. 49 and 50 remove the power of regulators by themselves to impose fixed and variable penalties. Amendment No. 52 removes the exclusion of the normal prosecuting authorities—the CPS, the police and their Scottish and Northern Ireland equivalents—from their normal prosecuting functions. In other words, the aim of my amendments is largely to keep the present system going and only to amend it where it produces improvements, rather than an oppressive effect. Amendments Nos. 55, 60 and 63 continue the process by removing Clauses 38, 39 and part—I emphasise, part—of Clause 41, which provide for statutory instruments to lay down the detailed operation of fixed and variable monetary penalty procedures. I invite the Minister, whom I, too, welcome to her place, to note that I have carefully not removed from Clause 41 the power to make stop orders and reparation orders—in other words, restorative justice orders because I can see the benefit of those and I have kept them in the clause.

The overall objective of these amendments is not to destroy the Bill, as has occasionally been feared, nor to damage in any way the existing regulatory system. I recognise that we need fair and carefully thought-out systems of regulation. The objective is to prevent the ousting of the jurisdiction of the ordinary courts, which provide one of the most important checks and balances in our free society and which are not adequately replaced by an end-of-the-line right to appeal to a specialist or non-specialist tribunal. The Bill, as drafted by the Government, potentially makes every regulator and every public official in every local authority, effectively not just the regulator, but the investigator, prosecutor, judge, jury and sentencer in his or her own cause, subject only to that ultimate right of appeal, supposedly to a first-tier tribunal. There may be other problems with the appeals procedure, which we will deal with in later amendments.

The idea mentioned by Professor Macrory is that this should be a specialist tribunal. Whether this will turn out to be the case in practice, given the huge diversity of subjects, is questionable when one remembers that the Bill covers something like 178 different statutes, plus all the statutory instruments that come under them, as set out in Schedules 6 and 7 to the Bill. This is a huge constitutional inroad into the liberties of tens of thousands—perhaps hundreds of thousands—of citizens who, in one way or another, will find aspects of their lives increasingly subject to regulation. If we were to count how many things we do that are regulated in one form or another, most of which we carry pretty lightly, and then think of all the regulations covering people who in ordinary life serve us in one way or another—whether they be hauliers, waste disposers, people in hospitals, people who manufacture drugs or gardening products, all the farming industry and so on—it is necessarily a very broad subject and these are immense powers. It is not just me who says this. Both the Delegated Powers and Regulatory Reform Committee and the Constitution Committee, of which I am a member, have warned of the unprecedented effects of this Bill.

Last July, on taking office, the Prime Minister told the other place that the Government intended to return the control of executive powers to Parliament. This goes in the opposite direction, because it takes away from the ordinary courts the right and duty to dispense justice and it gives it, subject only to that right of appeal, to public officials. The Delegated Powers and Regulatory Reform Committee, in its second report of the 2007-08 session, says in paragraph 34 on page 10:

“This Bill, among other things, enables subordinate legislation to prescribe, to an unprecedented extent, sanctions which may be imposed on those considered to have committed offences under a range of Acts or under subordinate legislation”.

Paragraph 48 states:

“The purpose of Part 3 of the Bill is to enable Ministers of the Crown to confer on regulators power to impose sanctions as an alternative to prosecuting the offender through the criminal courts … The Crown Prosecution Service, the police and the others specified in Clause 35(3) are excluded. So in practice this second category will comprise largely local authorities and Ministers”.

The Government argue that there are examples where this has happened before—and there are examples, but on nothing like this scale. If one takes the VAT authorities, the tribunal system is well established. The Financial Services Authority has similar powers and, at the other end of the scale, if you are appealing against a parking ticket, which is a civil penalty, you can go to the parking authority tribunal, or whatever its name is. But what is being done here is very different. With regard to VAT tribunals, the chambers I was in for many years, and from which I am now retired, has many barristers who are experts in this field. This is an extraordinarily complex and detailed area, and only a thoroughly expert tribunal is suited to dealing with it. It would be impossible to deal with it sensibly before magistrates or the Crown Court without making special provisions effectively for a special court. A lot of that applies to the FSA as well.

Parking regulations are utterly different. They are simply penalties in circumstances where one knows pretty well whether one is guilty. Most people accept their guilt, but in quite a large number of cases, if there has been a mistake, the decisions are turned over by the tribunals. One occasionally gets rather cross when they are not overturned but it is not a big deal for the citizen and it is perfectly acceptable.

Unfortunately, as I shall explain in a moment, in this area we are dealing with substantial penalties, even under the fixed monetary penalty system. They can be up to the magistrates’ court maximum, which I think is currently £5,000, and a penalty of half that amount can damage the lives of a large number of citizens. Then there are variable monetary penalties. I sympathise with Professor Macrory in that people who have committed very serious offences should be punished proportionately and the punishments may have to be very large fines, but if those fines are dished out by an official and are subject only to an appeal, that is not satisfactory.

The Bill was very much led by substantial business, although it is supported in many ways by small business. However, I think that sometimes the small business report gets overenthusiastic about King Stork and is overcritical of what might be seen as King Log. Other noble Lords will remember the moral of La Fontaine’s whatever it was called.

The Delegated Powers and Regulatory Reform Committee warns in paragraph 49 that:

“The scheme under Part 3 must be distinguished from the two types of ‘civil sanctions’ scheme which are more commonly to be found in existing legislation”.

I invite Ministers to think very carefully about whether they could go down that route—particularly the first type of civil sanction, which is,

“the system under which the offender is given the option of paying a fixed penalty as an alternative to being prosecuted and being heard in the criminal courts, but under which he may always choose to proceed to the criminal courts (e.g. selling alcohol to children)”.

The Minister may tell me that that can be done under this Bill, but there is a very big difference. It is one thing to settle with a regulator for a penalty which you agree, knowing that if you do not settle you will go before the court and the court will fix the penalty after a hearing. At the hearing it will see what sort of person you are and will make a decision based on the extent of your guilt, your means, your general circumstances and your health and so on, and will decide what is a fair and proportionate penalty. The alternative is to settle with the regulator, who has the complete whip hand. If it is a fixed penalty, he will impose the penalty that he has been told he can give.

In Grand Committee, I asked the Minister several times how much these penalties would be. The answer was, “Well, we haven’t really worked it out yet”. That is not very good when the Bill has been before Parliament for some months and it is coming up to a parliamentary year since Macrory’s crucial question.

I welcome—we will come to this in a moment—the fact that the Government have decided to get rid of the criteria method of judging a penalty. I always thought that that might be difficult. Finding a one-size or two-size-fits-all system—or will it somehow be a four-size-fits-all system?—will be very rough and ready. If the size does not seem fair to you, you will have to spend a lot of time and money going to a tribunal. What is more, the regulator has the whip hand because it has set the penalty.

The regulator has to ask what the court, for example, will give to a lorry driver who has strayed into a waste disposal area and has been caught. He probably has a lorry which does not have a massive value but it is his livelihood and, anyway, he may be up to his eyes in debt. He seems to the court basically to be a decent bloke and it will give a proportionate penalty—but the regulator will not because he does not have that discretion. We have a pretty rough-and-ready and overtough system.

The Select Committee on the Constitution made similar points in its first report of 2007-08. Paragraph 9 says in heavy type:

“The scheme envisaged in the bill will enable the transfer, on an unprecedented scale, of responsibilities for deciding guilt and imposing financial sanctions (with no upper limit) away from independent and impartial judges to officials”.

At the beginning of paragraph 9, the committee said that:

“An element of the core meaning of the rule of law is, in the words of A.V. Dicey”—

the great constitutional lawyer on whom we were all brought up—

“‘that no man is punishable or can be lawfully made to suffer in body or goods except for a distinct breach of law established in the ordinary legal manner before the ordinary Courts of the land. In this sense the rule of law is contrasted with every system of government based on the exercise by persons in authority of wide, arbitrary, or discretionary powers of constraint’”.

Wide, arbitrary and discretionary powers of constraint are being given to regulators under the Bill. They may blench a bit at “arbitrary”, but they are still pretty arbitrary given that they cannot even decide on the amount for a fixed monetary penalty.

The committee continued:

“Although many aspects of Dicey’s account of the rule of law”—

remember that this is the Select Committee on the Constitution, which is an all-party committee of this House—

“are now contested, this passage in our view continues to provide a powerful reminder of the importance of the role of ordinary courts, rather than the executive, in dispensing justice and punishment”.

It also raises the question of whether the Bill is compatible with Article 6 of the European Convention on Human Rights. I have a very important question to the Minister, of which I gave notice to the noble Lord, Lord Bach, an hour or two ago: on whom is the burden of proof going to lie before these tribunals? Will it be on the alleged defaulter to prove that the regulator was wrong, or on the regulator, in a case that starts again from the beginning, to establish guilt and then leave it entirely to the tribunal to fix whatever level of penalty is proportionate? I seriously want to know the answer to that. The Minister may find it difficult to answer tonight, but could we please have it in very good time before Third Reading?

If the burden of proof is reversed, I strongly suspect that, although the European Court of Justice in Strasbourg will accept such a scheme in some areas like this—it almost certainly accepts VAT tribunals, the FSA and that sort of thing—there is a very serious question whether it is Strasbourg-compliant. It is worth remembering that even if it is Strasbourg-compliant, it is a serious attack on our own United Kingdom rights.

I will read Article 6 because, like most of the convention, it is based on what in 1950 was the United Kingdom view of fundamental human rights. It reads:

“1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”.

It is the determination by the tribunal; it is not the determination by an official, subsequently brought to the tribunal. That is exactly what this Government are taking away from our citizens. We and they can now be found guilty by an official who is, as I have said, prosecutor, judge, jury and sentencer. Yes, we can appeal to a tribunal but this is a much greater burden on the citizen and a huge advantage to the regulator.

The Government believe that it is much more user-friendly to go to a tribunal. Going to a court on a criminal matter is, up to a point, a frightening thing. One can see that for a large business there may be considerable advantages in going to a tribunal on a civil matter, where, if there is a fine, you can pay it but it does not come through as a criminal conviction. But for a small business or an individual, the amount of money is what matters, as much as the opprobrium. It is said that businesses do not like the opprobrium of being found to have traded in bad meat or something like that, but if they have traded in bad meat they deserve some opprobrium. In Committee, I asked what would be done about that and apparently the Government will say that the regulators must post it on a website or somewhere, but I doubt that will have the same effect as coming before the courts of Hemel Hempstead.

My main point is that this Bill as drafted can be handled by substantial businesses who have lawyers and people who can write eloquent letters; they can cope with it as part of the business process. That is one of the reasons why the better regulation aspects are a very good idea. I think they will improve regulation. However, here we have supposed civil penalties in areas of criminality.

How will it work in practice? I apologise for speaking at some length, but this is a very important subject. How many cases are we talking about? I am sorry to say that the Government do not really know. I turn to Macrory’s final report. I have every respect for Professor Macrory, whose reports are very balanced. Although they recommend the system that the Government are putting in, they do not go for it categorically; they make very sensible recommendations for improving the ordinary court system, by training, by the Judicial Studies Board and so on. We know that there will be a lot of training if ever proper tribunals get going. Macrory’s final report says, on page 40, that, in 2004, 15,445 cases were prosecuted, of which 15,369 were in the magistrates’ court, which leaves just 76 for the Crown Court. Those figures are to be found in nothing more magnificent than footnote 39 and they are said to come from the Courts Service. Yet page 17 of the same document, quoting figures from CIPFA—I can never remember what CIPFA stands for but it is immensely respected and provides statistics for all local authority matters—gives a total not of 15,000 but of 24,533 cases, plus another 11,704 for the environmental health—formal cautions and court summonses. The total is about 36,000 cases.

The Minister told me in a helpful letter of 20 February 2008, for which I am most grateful—I cannot speak too highly of the courtesy and co-operation of the noble Lord, Lord Bach’s in handling the Bill—that these were supposedly for different periods, but I have looked carefully at the document and it is far from clear that they are for different periods. Even if they were for different years—say, one was for 2004 and one was for 2005—it is very unlikely that there will be a 150 per cent difference in the number of prosecutions; 15,000 to 36,000. What is more, the 15,000 figure is pretty unlikely when one discovers at another point in Macrory—I do not know whether the Minister knows this and I would ask him how many regulators there are—that there are 13,500 regulators. I think those are national regulators; I do not think that they are local authority regulators. If 13,500 regulators are only producing 15,000 prosecutions, it is a bit odd. I do not think that the Government have a grip on the figures.

Furthermore, the higher figures that I have quoted, the 36,000, only cover about one-third of the 28 regulators that are to be found in Schedule 5. I do not know why they are there, but 10 of the regulators to be found in Schedule 5 do not prosecute at all. I got all those figures from a series of Parliamentary Questions, as I said to Grand Committee, so I assume that the answers are correct.

How many cases does the Minister anticipate when all 178 statutes in Schedules 6 and 7, or at least the great bulk of them, have been brought into the scheme? What proportion is going to be dealt with by administrative penalties and what proportion will continue to be prosecuted in the criminal courts and which will be chosen for which treatment? I cannot give the page reference, but I do not think that Macrory is keen on hybrid systems. The Government’s proposal seems to be a hybrid system. I am grateful to the noble Lord, Lord Bach, for his letter of 20 February and his attempts to answer my questions, but some of them do not seem to be accurate. Much of the policy seems to be unclear and some of it seems to be self-contradictory.

Will the Minister give us answers to the following questions either today or in good time before Third Reading? First, how many cases have been prosecuted by regulators in the magistrates’ courts and Crown Courts in each of the past three years for which figures are available? I suggest that she tries to go a little wider than the Courts Service, whose figures do not seem to have been terribly reliable. Secondly, what proportion of those cases is it the Government’s intention to hive off to the proposed system of penalty imposed by officials and subject only to appeal by a tribunal?

Thirdly, what principle will be followed in making that decision? For example, the noble Lord, Lord Bach, told me in the letter of 20 February, which is in the Library, that approximately 9,000 of the 15,000 cases that he believed had been prosecuted would be handed to officials, and the other 6,000 would continue to be prosecuted before the courts and that the 6,000 would be what he described as the more egregious cases.

“Egregious” is one of those words the meaning of which instantly leaps to the mind of every noble Lord. It has been sticking out from the flock. It must mean that they are the more serious of those cases. My understanding is that the variable monetary penalty system is provided in order to prosecute the more serious cases, but if they are to go off to the Crown Court, why do we need the variable monetary penalty system? What is the basis for the Government’s argument that officials should be given powers to impose unlimited penalties?

Will the Minister tell the House what evidence exists that there is a genuine serious compliance deficit? That word has been bouncing around the Committee and discussions of this Bill as though Britain was somehow in anguish with a compliance deficit. However, Professor Macrory says in his final report that he believes that in many sectors compliance levels in the United Kingdom are generally high. Could the Minister identify before Third Reading in which sectors compliance is said to be generally high and in which it is not? He went on to say—presumably with regard to the areas in which it is not so high—that it is difficult to assess the general level of compliance in the United Kingdom because not every firm is inspected. God help us if that were so.

Professor Macrory goes on to say that tangible data in this area of compliance are absent. What are the Government proceeding on if Professor Macrory—a really excellent person—has not really discovered how much compliance there is, or is not? He goes on to say that he asked regulators for their view but, while they could tell him how many prosecutions or statutory notices they issued, they were unable to draw any conclusions on their impact on overall compliance. In paragraph 138, he says that he does not wish to trespass on the sentencing discretion of criminal courts. At page 73—this is where he is highly constructive about going down the route that I urge the Government to follow; that is, to stick with the courts—he makes recommendations for restorative justice and gives examples of how this has been working in the USA and Australia.

We know perfectly well that restorative justice can act partly through a tribunal, as it may do abroad, but it can act extremely well through the courts in this country. The Government are espousing that. When I was Attorney-General, I remember going with Mr Pollard as he then was—the chief constable of Thames Valley Police—to see an excellent example of restorative justice. It has been around for some time; all power to the Government’s elbow if they can improve it in this and other areas. Professor Macrory also suggests that the Judicial Studies Board and the Sentencing Guidelines Council should give their mind to these matters. That would be extremely helpful.

The criticisms of the magistrates’ courts, the magistrates say, are unfair. They say that the basic complaint—that they do not give large enough penalties—occurs because the prosecutors do not tell them the material facts of a case in sufficient detail.

My argument is that we are overturning a very well tried system—it involves hundreds of magistrates’ courts in every part of the country. If magistrates or the Crown Court are told, for example—this is the Oxford case, which was used by the noble Lord, Lord Jones—that somebody has been dumping cans of toxic waste for which they have been paid £58,000 in an area in which it costs £167,000 to clear it up, they are not terribly likely to give a penalty of £28,000. If they did, that would have to be for a very special reason. Since this is the case of the noble Lord, Lord Jones, I ask the Minister whether he will find out who prosecuted and what the prosecutors told the court. That rather important bit of evidence has not yet been forthcoming; perhaps it will be forthcoming, with luck, by Third Reading. I ask the Government to think again seriously about this system. I beg to move.

My Lords, I yield to nobody in my admiration of this House; I think that it is a wonderful House. What I find completely astonishing is the attendance here tonight. Reports from two of our Select Committees have drawn to our attention the fact that unprecedented powers are being conferred on a host of local authorities and regulators; so they are. I have not yet seen any answer to what the noble and learned Lord, Lord Lyell of Markyate, said in Committee. On the Labour Benches, if I exclude the Ministers, I see one Member; on the Lib-Dem Benches, there is one, and the number has sometimes risen to two; and on the Conservative Benches, there are eight. What we are being told by the noble and learned Lord is that we are faced with an extraordinary innovation that is not required at all. It is not required because we have a system of magistrates’ courts and Crown Courts that can handle genuine cases where a breach of regulation is alleged.

I shall be brief because it is now late in the evening and the noble and learned Lord has said everything that needs to be said, but there are three keys points here. First, we are going to have the same body in a series of cases—many cases—acting in the roles of investigator, prosecutor, judge, jury and sentencer. Secondly, we are going to have a reversal of the burden of proof because the citizen, the company or whoever is at the receiving end of one of these decrees coming out of the regulator or local authority will find that he is said to be guilty of something, and the fine or penalty has already been imposed. It will be as it is with a parking ticket where, in effect, you start one down trying to prove that it was not your car. Thirdly, there is the human rights aspect. What has happened to due process in all this? It seems to have been completely ignored. Article 6 of the convention has been totally overlooked.

In effect, we are being driven by a Bill based on the views of Professor Macrory, who starts with his concept of a compliance deficit. The noble and learned Lord, Lord Lyell, will recall the usual Irish joke: when somebody asked the question, “What is a compliance deficit?”, counsel would reply—I cannot do the accent—“My Lords, on the hills of Connemara they talk of little else”. Nobody has the faintest idea what this concept is and what the evidence is that can establish it. Therefore, I add my voice to that of the noble and learned Lord and say that it is time to ask the Government to supply answers to the questions that he put in Committee and has put again today, and to rethink their whole policy in this area before Third Reading.

My Lords, my noble and learned friend has rendered the House and, more widely, those outside a signal service. Every minute of his speech was properly taken up in revealing a matter of great constitutional importance that is of great importance to all of us who are concerned with due process and the machinery of justice.

I remind the House that in the Committee on the Criminal Justice and Immigration Bill, which has just been completed, Ministers were at pains, time after time, to assert their confidence in and admiration for the magistrates’ courts. In these days of joined-up government, I hope the Minister who will reply will tell us why the Government are attaching such importance to bypassing the magistrates’ courts in this important jurisdiction.

My Lords, we have this evening, as we did in Grand Committee, listened to an extremely eloquent and persuasive speech by the noble and learned Lord, Lord Lyell of Markyate. His main thrust—indeed, his main amendment—is to remove from the Bill the ministerial power to give a regulator power to issue civil sanctions.

Perhaps I may be critical of the noble and learned Lord and of the noble Lord, Lord Neill of Bladen. Both of them used, more than once, the language of the criminal law, saying that the same person was to be prosecutor, judge and jury in the same case, when they were talking about civil sanctions. There are benefits to the consumer and business in following the general principles of the Macrory report, to whose worth the noble and learned Lord gave due obeisance. The main thrust of the report is to give greater flexibility to the regulator and to provide for civil sanctions as a suitable alternative in some cases—in the less “egregious” cases, to use the Minister’s word, which I would not have chosen myself—where, because the matter is less serious, the full panoply of the criminal law and prosecution in the magistrates’ court or the Crown Court may not be warranted. Macrory suggests that there should be procedures for civil penalties instead.

I am glad that on this occasion, but not in Grand Committee, the noble and learned Lord, Lord Lyell, has not attacked the provisions for stop orders or restitution orders. As far as I can see, he has confined his criticism to fixed and discretionary civil penalties.

I would not differ from the noble and learned Lord in his claim that the magistrates’ courts and the Crown Courts have, over the years, been extremely helpful in dealing with the criminal law in legislation such as the Trade Descriptions Act—I think that we both referred in Grand Committee to the fact that it is having its 40th anniversary this year. That Act has done a great deal of good in consumer protection and just as much good, if not more, in its deterrent effect. The fact that it is there and that there is the potential of criminal prosecution has been just as important as the actual cases that have taken place and that have, no doubt, registered with businesses up and down the country.

As the noble and learned Lord admitted, conviction before a criminal court has a severe meaning for a respectable business. Certainly businesses regard the full force of the criminal law as most undesirable and to be avoided. That is the great benefit of the deterrent effect of the criminal law. But the criminal law is not always needed in every case of a business contravening a particular statutory requirement; it is not needed in every case to ensure compliance and to correct the deficiencies and the faults of business. The noble and learned Lord was teasing the Minister about his letter of 20 February and the use of the phrase “egregious offences”. The letter said:

“Like Professor Macrory, we believe that regulatory offences do not always merit a criminal prosecution and that the court should be reserved for the more egregious offences”.

That is surely sensible and right irrespective of the adjective. The greater flexibility introduced in Part 3 of the Bill is most useful.

Of course, for civil sanctions as for criminal sanctions, there must be procedural safeguards, despite the fact that civil sanctions do not have the same dramatic effect and do not register as criminal convictions.

My Lords, the Minister said that egregious or more serious cases should go to the courts. Those were 40 per cent of all the cases that he produced. I have provided the figures on how many went to the magistrates’ courts and the Crown Court: 15,385 went to the magistrates’ courts and 76 went to the Crown Court. Now we are finding that 40 per cent are to go off to the courts and 60 per cent are to go into the new civil system. Did that not surprise the noble Lord, Lord Borrie?

Not really, my Lords. I imagine that there are more cases that are less deserving of criminal prosecution than those that are deserving of criminal prosecution. That is all that one needs to say on those figures. The greater flexibility that Part 3 provides is beneficial, so long as there are procedural safeguards—that was the point that I was making when the noble and learned Lord intervened. I do not think that the noble and learned Lord referred to them, but they require a notice with reasons of what the breach of the law has been, an opportunity for reply and a review. The regulator may then confirm his original view or not. If he confirms his original view, there is a right of appeal, albeit to an administrative tribunal.

I do not bow to the noble and learned Lord in my regard for the magistrates’ courts and the Crown Court, but tribunals are not novel in 2008. There is another anniversary: it is the half-century of the Tribunals and Inquiries Act 1958, which was established following the famous Franks committee, under Sir Oliver Franks, as he was then, to ensure the impartiality, fairness, merit, speed and efficiency of tribunals, which had been questioned. In other words, tribunals have a high reputation, too, and they seem very suitable to be entrusted with the task of dealing with the kind of cases that we are talking about under Part 3 of this Bill.

My Lords, before the noble Lord sits down, will he address the point that the language of Clause 38 speaks of a “relevant offence”? The whole of this is founded on the basis that there is an offence and that you get out of it—for example, under Clause 39(5)—only by having a defence that would completely answer a criminal conviction. In other words, the two systems are inextricably confused and the man in the street cannot possibly be looking at this in the way that the noble Lord is, which is that it is all civil penalties and nothing to do with the criminal law. It is all about offences.

My Lords, I do not wish to take up the time of the House, but my answer to that is that of course the starting point is a criminal offence, for which there could be a criminal prosecution. The purpose of Part 3 is to provide an alternative to a prosecution and to get at the problem in a somewhat different way.

My Lords, we are in great danger of underestimating the impact of the introduction of this wide system on the individual. We are in danger of being shanghaied by the business community. This is not going to be easy. For example, if you privately abstract water, regulations and forms have to be filled in, with penalties attached to the abstraction licence if you do not stick to its conditions. There are lots of people in similar situations, living under regulations as individuals, and those people are used to the idea that, if they infringe, they go in front of the magistrates. There are social consequences of these courts being replaced by officials—in whom there is not the slightest degree of trust at the moment—who can be both judge and jury. This is going to take years for people to accept. Civil penalties for traffic offences, for example, do not do the relationship between the individual citizen and the police any good at all. On the whole, we do not like cameras or their consequences. This debate is about a compliance deficit which none of us can quite find and whose size and diversity we do not understand. We have been given no detailed evidence about the compliance deficit. We are completely underestimating the social consequences of what is proposed.

My Lords, I sympathise with the amendments of the noble and learned Lord, Lord Lyell. This part of the Bill that has not been properly addressed and, like my noble friend, I would like further assurances concerning the Bill empowering all regulators, and not only investigators and prosecutors, to become judge, jury and sentencers in their own cause. This is subject only to a right of appeal by the business or citizen concerned to a tribunal, probably the first-tier tribunal. It certainly appears to be a constitutional flaw within the Bill. I know that the Minister has no intention to affect negatively small businesses, small farmers, homeowners, drivers, small shopkeepers and others.

I would thus be keen for the Minister to clarify the impact of the Bill on small businesses. I hope that conversations may now be set up between the Minister and my noble and learned friend Lord Lyell of Markyate. I would have said “before Third Reading”, but we have run over time. The Minister has kindly said that there will be second day for this Report stage, which is likely to be 31 March at 7 o’clock in the evening. That will provide time for us to look seriously at this matter, for civil servants to give their views to the Minister, and for the noble and learned Lord, Lord Lyell, long though he may have waited, to have his say. He must feel that the House has listened sympathetically to him and is interested in the outcome. We thank the Minister.

My Lords, I thank the noble and learned Lord, Lord Lyell, for his eloquent contribution to the debate. He will not be surprised to hear me say that I regret that we cannot accept the amendments, which are profound and would render Part 3 of the Bill pointless.

A large number of questions have been raised. On points of fact, I will be happy to write and have further discussion. I have received many notes from my staff with detailed answers, but given the time, I shall confine my remarks to restating the benefits and the purpose of the Bill.

The new sanctions will enable regulators to enforce offences much more effectively. They provide a clear, more flexible and proportionate approach to enforcement, and should help reduce the level of non-compliance and enable a more co-operative and consensual approach to regulation.

The noble and learned Lord has implied that criminal courts provide an adequate system and that there is no such thing as a compliance deficit. We should not forget that the powers in Part 3 are an alternative to criminal prosecution, and that the courts will have a continuing role to play in enforcing such offences. Professor Macrory said that the more serious and egregious cases should be dealt with by criminal courts to preserve the stigma of criminal conviction. Companies should not disregard criminal fines and sanctions as part of the normal cost of doing business.

We should not forget that Professor Macrory made a number of recommendations that would help the criminal courts to tackle regulatory offences. He felt that the courts should be better equipped to deal with such offences by improving training, sentencing guidelines and information from prosecutors, and introducing new sentencing options. These recommendations were accepted by the Government in full and are being taken forward separately from this Bill.

As my noble friend Lord Borrie said, criminal prosecutions are not an answer in every case. Not every breach of regulation will warrant a criminal prosecution but most regulators lack a viable alternative means of enforcement, which has left them overreliant on criminal prosecution as a means of tackling breaches of regulation. This is what Professor Macrory identified as the compliance deficit, where no enforcement action has been taken because the appropriate tool is not available to the regulator. These civil sanctions provide more flexible means of tackling regulatory non-compliance.

Magistrates’ courts do not always have the necessary tools to tackle regulatory non-compliance. These cases tend to make up less than 1 per cent of all cases heard in magistrates’ courts. Philip Hampton, for example, found that a magistrate will typically see a health and safety offence once every 14 years. In contrast, regulators will be solely concerned with dealing with regulatory non-compliance in a particular field and will have a better overview of the seriousness of cases, the nature of the market, the profits made and the participants in that market—a view the regulator would have to take account of when it came to individuals as well as businesses. They will also be better equipped to set penalties that can provide an adequate sanction and deterrent, and can ensure that there are fewer regional variations. They will also be able to engage in more co-operative regulation by accepting undertakings from a business that is keen to put right any harm caused by its actions.

The noble and learned Lord accepts that administrative penalties have a role to play in certain regulatory fields. It is worth remembering that 15 regulators already have access to civil sanction, including the Health and Safety Executive, the Financial Services Authority, the Trading Standards Institute, the Office of the Rail Regulator, the OFT, Ofcom, Ofwat and Ofgem. The noble and learned Lord also raised concerns about the scope of the new provisions. We have limited access to the new sanctions to those regulators listed in Schedule 5, those who enforce the offences listed in Schedule 6 and those who enforce offences in secondary legislation made under enactments listed in Schedule 7. There is no power in the Bill to add to this by order.

The new powers will obviously be granted to regulators by ministerial order and require an affirmative resolution procedure. These new sanctions have also been subject to a thorough process of consultation, both as part of the original Macrory review and following publication of the draft Bill. They were welcomed by regulators, businesses, local authorities and representatives of the judiciary. I can provide quotes from the copious notes I have now received from representatives of the judiciary welcoming this.

Concerns were raised in your Lordships’ House about the safeguards in place. Incidentally, it is not right to say that Article 6 has been ignored in the design of the civil sanctions. Noble Lords will have seen in the Explanatory Notes that we have considered such matters and are sure that the Bill contains minimum procedural requirements to ensure that Article 6 is protected. We have also given detailed answers to the Joint Committee on Human Rights on its questions on Article 6 in a letter dated 14 January 2008. This letter is in the House Library.

I will not accept that we have not considered these matters. We listened to concerns raised by noble Lords. We have taken these into account and significantly improved the Bill. We added details on the grounds for appeal, a requirement on the Minister to review the effectiveness of any order conferring powers after three years, a power for the Minister to suspend the use of new sanctions where they are persistently misused and to specify that a regulator must be satisfied to the criminal standard of proof prior to issuing a fixed monetary penalty or discretionary requirement—which is why the analogy with the traffic warden really does not apply. We have also added, during the Bill’s progress through this House, a proposed notice of intent stage in the imposition of fixed monetary penalties, restricted the level of fixed monetary penalties and variable monetary penalties and how they can be set, and simplified the method of setting them, requiring regulators to publicise details of enforcement activity. That is in addition to the safeguards that were in place in the Bill on its introduction.

I understand the concerns expressed by the noble and learned Lord about a system in which a regulator rather than a court will impose a sanction. As I have already outlined, the Bill has put in place many safeguards, which mean that there will be no disadvantage for persons who will be subject to a civil rather than criminal sanction. In fact, there may be an advantage in having a system administered by trained experts experienced in the regulatory field.

Amendments Nos. 49, 50, 51, 52, 55 and 60 would prevent regulators imposing any of the new sanctions or accepting undertakings. Amendments Nos. 49, 50, 55 and 60 specifically would prevent regulators imposing any kind of monetary penalty. The noble and learned Lord’s amendments suggest a fundamental disagreement with the introduction of the civil sanctions and that these sanctions should be removed from the Bill altogether. I regret that I do not see what more we could do to satisfy him.

Amendment No. 52 would remove the exclusion of the police and prosecution authorities, such as the Crown Prosecution Service, from the definition of regulators in Clause 36. It would therefore allow these authorities to impose the civil sanctions in Part 3. As we stated in Committee, the new powers in Part 3 are an alternative to criminal prosecution and the latter will remain available to the police and prosecution authorities. The powers in Part 3 are designed specifically for use by regulators, who have closer ongoing relationships with and supervision of businesses, and it would not be appropriate to extend their usage to the police and prosecution authorities, which are primarily concerned with criminal matters. Under Clause 68, police and prosecution authorities will be able to refer matters to a regulator if they consider that a civil sanction may be more appropriate.

Given the lateness of the hour, I have nothing further to add except that I hope that the noble and learned Lord will feel able to withdraw the amendment.

My Lords, have we not set up a Supreme Court to keep the judiciary away from the political process? In that case, why does the Minister cite the opinions that judges have expressed on this Bill as an argument to persuade the noble and learned Lord to withdraw his amendment?

My Lords, because they were consulted, as noble Lords would have expected us to consult them. If we had not done so, noble Lords would have asked why we had not.

My Lords, I am a little in doubt as to our procedural position at the moment. Are we just going on through the evening—

My Lords, the usual channels have agreed that we will adjourn at 10 o’clock, or around 10 o’clock, at the end of the debate on this group of amendments. The noble and learned Lord will have to decide whether to have a vote or withdraw his amendment. After that has finished, it is my intention to adjourn Report and then to adjourn the House.

My Lords, that is extremely helpful. I had hoped that we were going to come to an end by fluxion of time at 10 pm and that the Minister would have time to prepare the answers which he understandably found it difficult to give tonight to my questions. That not being the case, I can tell the House that it has always been my intention to withdraw the amendment at this stage and to return to it, in so far as the rules of the House allow, at Third Reading. I am extremely grateful to all the noble Lords who have taken part and I include the noble Lord, Lord Borrie, who has immense knowledge of these matters. I would like to make quite a number of points in reply both to him and to the Minister, but if I start doing that now I will be another 10 or 15 minutes and that is not sensible. So at this stage, I beg leave to withdraw the amendment and we will return to the substantive issues later.

Amendment, by leave, withdrawn.

[Amendments Nos. 50 to 52 not moved.]

My Lords, I beg to move that consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.

House adjourned at 10.11 pm.