Regulatory Enforcement and Sanctions Bill [Lords]

Public Bill Committee, 17 June 2008.

Christopher Chope (Conservative, Christchurch)

Before we begin, I have a few announcements to make. The hon. Member for Stafford has asked me informally whether people may remove their jackets, should they so wish. That is certainly all right by me. Will hon. Members ensure that their mobile phones and pagers are turned off or switched to silent during our proceedings?

Copies of the money resolution connected with the Bill are available in the room. I remind hon. Members that adequate notice should be given of amendments. As a general rule, I and my fellow Chairman do not intend to call starred amendments, nor do we intend to call amendments that are not signed by members of the Committee because we presume that they would not be moved.

I remind hon. Members about the procedure at the start of today’s sitting. The Committee will be asked first to consider the programme motion on the amendment paper for which debate is limited to half an hour. We shall then proceed to a motion to report written evidence before starting clause-by-clause scrutiny.

Pat McFadden (Labour, Wolverhampton South East)

I beg to move,

That—

(1) the Committee shall (in addition to its first meeting at 10.30 a.m. on Tuesday 17th June) meet—

(a) at 4.00 p.m. on Tuesday 17th June;

(b) at 9.00 a.m. and 1.00 p.m. on Thursday 19th June;

(c) at 11.00 a.m. and 4.00 p.m. on Tuesday 24th June;

(d) at 9.00 a.m. and 2.00 p.m. on Thursday 26th June;

(e) at 10.30 a.m. and 4.00 p.m. on Tuesday 1st July;

(2) the proceedings shall be taken in the following order: Clause 1; Schedule 1; Clause 2; Schedule 2; Clauses 3 and 4; Schedule 3; Clauses 5 to 28; Schedule 4; Clauses 29 to 37; Schedules 5 and 6; Clauses 38 to 62; Schedule 7; Clauses 63 to 77; new Clauses; new Schedules; remaining proceedings on the Bill;

(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 7.00 p.m. on Tuesday 1st July.

I welcome you to the Chair, Mr. Chope. I am sure that I say on behalf of the whole Committee how very much we are looking forward to your guidance in our deliberations. When I first glanced at the membership of the Committee and saw your name beside a little passport-sized photograph, I thought we would be in for a long, hot summer—we might still be. I then realised that you were in the Chair, which I thought was a bit like Barcelona having Ronaldinho as the referee rather than leading the attack.

I thank all those who have been involved in the Bill’s deliberations so far. We have had extensive consultation with businesses, regulators and those in many local authorities—all of whom have contributed extensively, for which we are grateful. The Bill was also subject to extensive and constructive debate in the other place and it comes to us improved by the work of colleagues there. It will change how we enforce regulations throughout the country, and it will create an expert body for the improvement of regulations at local level. It will create a framework for a more targeted and proportionate sanctioning of non-compliance with regulation, and it will assist in the reduction of the imposition of unnecessary burdens by our regulator. I am sure that we shall debate all such matters in significant detail over the coming weeks, and I look forward to those deliberations.

Mark Prisk (Conservative, Hertford and Stortford)

I add my welcome to you, Mr. Chope. I know that you will provide us with firm and fair guidance from the Chair as we consider the matters before us. I also welcome the Minister. I am sure that we shall have a positive dialogue, and I hope that we can provide him with some relief from the endless debates on post office closures that have, I suspect, been a darker period for him. I hope we can provide him with a little relief from that in our social responsibility role on the Conservative Benches. I welcome the fact that no knives or guillotines are contained in the programme motion and I know that as a staunch parliamentarian, Mr. Chope, you will welcome the fact that there are no such limits on our ability to consider the matters in their full. That is important because sometimes Labour Members take a heavy-handed approach, which can limit our ability to explore the unintended consequences of such issues.

As the Minister said, the Bill began in the other place and, to use his words, it has been improved. The Government have been forced to accept more than 12 major concessions, and I put on the record my sincere congratulations to all the Members of the other place who participated in that process, particularly my Conservative colleagues who engaged actively in that scrutiny and did their job extremely well. However, there remain some worries and the Minister referred to one or two of them, which is why the programme motion is important.

There are concerns about the powers and scope of the Bill, about accountability, about the potential for injustice in what might be seen as a parking fine approach to regulation in part 3 and about whether the Bill can achieve what Ministers are promising. However, given the concessions already made in another place, my aim in the debate is to be precise in my scrutiny and concise in my remarks, so I have no intention or wish to oppose the motion.

Lorely Burt (Liberal Democrat, Solihull)

Last but not least, I welcome you to the Chair this morning, Mr. Chope. I add my thanks to the bodies that so kindly advised our team, including the CBI, the Local Authorities Co-ordinators of Regulatory Services and the British Retail Consortium; they have helped us tremendously in understanding some of the practical implications of the Bill. As my Conservative colleague said, the Bill has been much improved in the Lords. The contribution of my colleagues in the Lords has been a valuable help in making the Bill stronger, so that it will balance the needs of business with the local requirements of enforcers on the ground—at the coal face—and the practical requirements with the needs of local democracy.

I am looking forward to a concise debate on the outstanding issues that we have to discuss. The Liberal Democrats have tabled only a small number of amendments and we look forward to taking the debate forward in a spirit of constructive criticism.

Christopher Chope (Conservative, Christchurch)

Copies of any memorandums that the Committee receives will be made available in the Committee Room. We now proceed to clause-by-clause scrutiny.

Clause 1

Pat McFadden (Labour, Wolverhampton South East)

The clause is a simple one, establishing the Local Better Regulation Office as a corporate body. There are a number of amendments tabled to the accompanying schedule 1, which sets out in detail how LBRO is intended to be established in statute. I shall reserve my main comments for those amendments, which attempt to alter in various ways the establishment of LBRO. The central part of the Bill is to establish the body, to carry out a number of functions to do with better regulation—advice to local authorities and central Government and adjudicating in certain ways between primary and enforcing authorities around the country. The clause is one of the central building blocks of the Bill, establishing LBRO to further the better regulation agenda at local level.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for those brief but helpful opening remarks. He said that the clause is short, but equally—in his words—it is essential. It establishes the Local Better Regulation Office, which we will perhaps shorten to LBRO with your permission, Mr Chope. The provision follows from the Hampton review, which looked at the whole way in which risk-based regulation should proceed. It is, in essence, the Government response to the need for raising quality and improving the narrowing wide variance in how local authority regulatory services operate.

We are looking at not just trading standards, but environmental health and matters such as licensing. There are several concerns, not least the fact that we are being asked to believe that a single organisation—a reasonably small organisation—will be able to deliver a significant change in regulatory practice for nearly 500 different local authorities. Effecting the kind of improvements that Ministers seek, especially for the worst regulators, would need, in my view and the view of many of those involved, a considerable change in the internal management, training and culture of those organisations. We are being asked to agree to a small organisation taking on what is a very significant task. My question to the Minister, therefore, is how will the LBRO deliver that change to so many different organisations?

Christopher Chope (Conservative, Christchurch)

Does the Minister wish to respond?

Mr. McFaddenindicated dissent.

Christopher Chope (Conservative, Christchurch)

It is not compulsory. If the Minister does not rise I presume that he will not be responding and we shall move on.

Mark Prisk (Conservative, Hertford and Stortford)

I was rather anticipating that as a question was asked from the Opposition Benches, the Minister might provide an answer. I hope that he will be able to do so.

Pat McFadden (Labour, Wolverhampton South East)

I am happy to elucidate further upon LBRO and how it will do its job. The hon. Gentleman is absolutely right to root the discussion in the Hampton report, which was carried out three years ago. Hampton identified two basic problems in local better regulation. The first was inconsistency. Different advice was being given to businesses operating around the country; a business might get a green light in one local authority area, but a red light in another. Hampton found that to be costly and cumbersome to business. The second major flaw he identified was inflexibility in how regulation was enforced, particularly in the penalty regime. That applies more to part 3 than to clause 1, but those were the two issues that Hampton identified.

Our response is to establish the Local Better Regulation Office. The hon. Gentleman is right: local authority regulators sit at the centre of a complex system. His question is: how will a small organisation deal with the two quite major issues that Hampton identified? The first thing that I point him to is the board of LBRO. The LBRO has already been established as a company and a board has been appointed, and I hope he agrees that the board represents significant expertise from local authority, trading standards and business backgrounds. That expertise will be of significant help in enabling the LBRO to deliver its aims.

The LBRO will work closely with national regulators, local authorities and businesses, seeking their assistance and co-operation in delivering better regulation. It has a relatively small budget of about £4.5 million a year, but part of that will enable it to provide a level of financial support and assistance to local authorities in carrying out those functions. The hon. Gentleman is right to say that it is a relatively small organisation, but it will occupy a pivotal role at the centre of a complex system of regulation. The expertise of the board and the work it will do with all the different players—regulators, local authorities and businesses—will enable LBRO to carry out the job that we hope it will do.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for going into the background. What I am trying to tease out is a practical issue that I have a degree of scepticism about—the practical reality of a single, small organisation being able to effect cultural change in nearly 500 organisations. The Minister is a former special adviser to the former Prime Minister, Mr. Blair. I think the phrase used by Mr. Blair in those days was that he had the scars on his back from trying to effect change in Whitehall. The Minister will therefore be acutely aware of the difficulty in achieving the kind of change that I suspect he, most of business and I want to see. Does he recognise that it will be a significant challenge, and is he confident that the resources and powers in the Bill are sufficient?

Pat McFadden (Labour, Wolverhampton South East)

I recognise the challenge. My old boss, the former Prime Minister, was referring to the great Whitehall machine when he talked about having scars on his back. In the Bill, what we are talking about is important but in a different way. It is about how local authorities and organisations enforce regulation. The challenge for LBRO is to ensure that the two weaknesses identified by Mr. Hampton, those of inconsistency and inflexibility which I mentioned a couple of minutes ago, can be dealt with. Not all of that is done through the clause and we will go on to talk about the different powers that the LBRO uses to carry out its functions.

We believe that it should be an organisation with teeth and I welcome the hon. Gentleman’s indication that he agrees with that. Some of the amendments before us might, if passed, reduce the LBRO’s powers to be effective and could leave us with a weaker organisation. I do not want that to happen. The message from business is very important. Business wants to see clarity and consistency in the enforcement of regulation. It is one thing to have a debate about the substance of a regulation and whether it is necessary, but it is another to lack clarity about how that will be enforced in different parts of the country. That issue is an essential part of LBRO’s work.

However, it is not just about how LBRO works at local level. An important part of its job will be to speak to the regulators and to central Government about the regulations. It is not only an “eyes downward” organisation at local level; it has an important upward voice. The Government believe that currently there is a gap there, which LBRO will be able to fill. It has an important role, both in advising central Government and in ensuring consistency in the application of regulation at local level.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister; it has been a useful exchange. Clearly, the LBRO is one of the principal elements of the Bill, and all the powers and subsequent clauses in part 1 relate to whether it will be able to fulfil its task. I remain sceptical about its ability to fulfil that role, but I hope that it achieves it. I hope that the Minister’s sunny optimism will be proven right and I would be more than happy to—I was going to say buy him a pint of Guinness, which perhaps after Friday’s marvellous result would be even more appropriate. I am happy to be proven wrong, but at the moment I am not entirely convinced. However, the clause is there and I am grateful to the Minister for putting on the record the Government’s confidence in the ability of LBRO to do this with the resources and powers that it has. On that note, I will delay the Committee no further.

Lorely Burt (Liberal Democrat, Solihull)

May I confirm that we are discussing schedule 1?

Christopher Chope (Conservative, Christchurch)

No, we are not.

Schedule 1

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 17, in schedule 1, page 38, line 13, leave out sub-paragraph (3).

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss the following amendments: No. 18, in schedule 1, page 38, line 17, leave out sub-paragraph (5).

No. 19, in schedule 1, page 38, line 20, leave out ‘special’.

Mark Prisk (Conservative, Hertford and Stortford)

These are probing amendments and seek to put certain details on the record, which I hope will enable the implementation of the legislation to be improved. Amendment No. 17 seeks to delete subsection (3) on page 38. Its purpose is to ask the Minister what we mean by Welsh Ministers. Are they members of the Welsh Executive, Ministers of the Crown, or both?

Amendment No. 18 is another probing amendment, which relates to paragraph 3(5) of the schedule. It states:

“LBRO is to pay to or in respect of the ordinary members such sums as the Secretary of State may determine by way of or in respect of remuneration allowances, expenses, pensions or gratuities.”

I am not entirely clear what that text means; perhaps there is an additional or a missing word, or a typographical error. I am not sure, but I shall be happy if the Minister would clarify that. I have three or four different interpretations of it, and I would be interested to hear the Minister’s reply as to whether there is an additional “to” in there.

Thirdly, amendment No. 19, relating to paragraph 3(6), reads:

“If the Secretary of State thinks that there are special circumstances that make it right for a person ceasing to be an ordinary member of LBRO to receive compensation, LBRO must pay to that person such compensation as the Secretary of State may determine.”

Can the Minister explain what he regards as those “special circumstances”?

Lorely Burt (Liberal Democrat, Solihull)

I am a little confused by these amendments. I am not entirely sure why the hon. Member for Hertford and Stortford maintains that they would make enforcement more effective by taking out any rules regarding how the LBRO should be composed. If amendment No. 18 means that LBRO members would not be civil servants, why does he want to delete that?

Mark Prisk (Conservative, Hertford and Stortford)

These are entirely probing amendments. I have no wish to delete them, and it is not my wish to move them. My purpose is clarification of the Bill.

Lorely Burt (Liberal Democrat, Solihull)

That is fine. I wait with bated breath what the Minister has to say in response.

Pat McFadden (Labour, Wolverhampton South East)

We had a debate about the basic purpose of LBRO, and schedule 1 gives significant detail on how the organisation is proposed to be established and run. I shall briefly answer a couple of the questions asked directly by the hon. Member for Hertford and Stortford. The term “Welsh Ministers” means members of the Welsh Executive.

He asked about the wording in paragraph 3(5) of the schedule. As I understand it, this is absolutely standard wording for describing payments to people doing this kind of work, so we see nothing unusual about that wording. The whole schedule is designed to give effect to LBRO and to enable it to carry out its work, in seeking to support local authorities in developing an approach consistent with the principles of better regulation.

The schedule—or rather, the Bill—will, as well as the functions that we have talked about, also help to give LBRO a role in preparing lists of priorities for enforcement for local government, which can be an issue, given the number of different priorities that central Government gives. In terms of the specifics of the amendments, I am glad to see that they were probing, because the effect of approving the amendments would be to neuter the body from the beginning, so I hope that the answers that I have been able to give on the subjects of payment and Welsh Ministers have been helpful.

Let me turn to the third of the amendments, amendment No. 19, which asks about “special circumstances”. We have deliberately set up the body to operate independently of Government, bringing the expertise of its members to bear on issues raised by local authority enforcement. The wording of “special circumstances” follows well established precedents, and I shall mention just a few. For example, similar measures were included in relation to board members of Natural England in the Natural Environment and Rural Communities Act 2006. The Value Added Tax Act 1994 specified that there can be compensation:

“If a person ceases to be a chairman of VAT tribunals and it appears to the Lord Chancellor that there are special circumstances which make it right that he should receive compensation”.

There is similar wording in the Criminal Justice Act 1988. The Bill follows those models and provides for the possibility of cases where the provision of some form of compensation is appropriate. Such circumstances would be rare.

I hope that I can clarify things for the hon. Gentleman. We do not believe that there should be a presumption for compensation to be paid. That is why “special” is used. Board members will come to the end of their contract naturally or could be removed for any of the other reasons set out in the schedule, including committing a criminal offence or failing to comply with the terms of their appointment. In the vast majority of cases, it would not be right for compensation to be paid. However, it seems prudent to us for the Bill to allow for unknown contingencies. The reasons for that inclusion means that we have used “special” to describe circumstances in which compensation might be paid. I hope that that helps to clarify the point.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for providing those clarifications. As he knows—I know you know, Mr. Chope—one of the purposes of probing amendments is not necessarily to change the legislation, but to make sure that those putting it into practice understand the Government’s intention. Often the Bill cannot provide that. Therefore, the purpose of the three probing amendments and of a good number of others is to use our deliberation to get that clarification on the record.

I am grateful about amendments Nos. 17 and 18. I am particularly grateful for the recognition and clear statement that there should be no presumption about payments under sub-paragraph 3(6). On that basis—the hon. Member for Solihull can unbate her breath—I beg to ask leave to withdraw the amendment.

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 20, in schedule 1, page 39, line 39, leave out subsection (1).

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss the following amendments: No. 21, in schedule 1, page 39, line 40, leave out subsection (2).

No. 22, in schedule 1, page 40, line 3, leave out subsection (4).

Mark Prisk (Conservative, Hertford and Stortford)

These are, again, probing amendments—bated breath or otherwise. Let us look at page 39, dealing with paragraph 8, on committees surrounding the operation of LBRO. Amendment No. 20 removes the provision for LBRO to establish “one or more committees”. The provision is perfectly reasonable, but it would be helpful to know the Government’s intention or wish concerning the scope of those committees. It would help us to know the limits.

Amendment No. 21 is similar. It seeks to delete sub-paragraph (2):

“A committee established under this paragraph may include persons who are neither members nor employees of LBRO.”

The clause permits anyone to be on such a committee and, as we learn later, that is a paid position. Money comes from the public purse. Who appoints? What will the basis of those appointments be?

Amendment No. 22 is about paragraph 8(4), which is at the top of page 40:

“LBRO may pay sums by way of or in respect of expenses to or in respect of a person who is a member of a committee or of a sub-committee established under this paragraph but who is not a member or employee of LBRO.”

That is a wide statement. Given the heightened public interest in expenses, to what are the rules for those arrangements subject? What independent oversight might there be, should things go awry?

Pat McFadden (Labour, Wolverhampton South East)

The amendments relate to the capacity of the Local Better Regulation Office to appoint sub-committees. One example of an important sub-committee that one would expect an organisation like this to appoint is an audit committee. We would also hope to allow the appointment of expert advisers to that committee and to pay its members. This is an independent body, operating at arm’s length from the Government, and it needs that independence to create the right governance arrangements for its statutory role. If I may refer to similar organisations and parallels in other legislation, both the Commission for Architecture and the Built Environment, created by the Clean Neighbourhoods and Environment Act 2005, and the Serious Organised Crime Agency, created by the Serious Organised Crime and Police Act 2005, have similar powers to create committees.

The LBRO will not necessarily stop with an audit committee; it might wish to appoint an advisory committee, to advise it on issues raised by one or more of its functions. It should be a matter for the LBRO to decide whether it wishes to go down that road, but it may set up committees that will help it achieve its objectives. I hope that that gives some clarity on the purpose of the measure.

The hon. Gentleman asked a couple of specific questions. LBRO itself would appoint the individuals. Payments would be governed by the usual public money rules. As will be discussed later, LBRO has to account to both my Department and Parliament for its expenditure in the normal way. It has been granted a budget for the next few years, pending the approval of the legislation in Parliament, but any expenditure on paying people on its committees will have to come out of that budget.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for responding. I have no wish to try to instruct the LBRO in advance regarding specific committees. Our purpose is to clarify exactly how this will work and what recourse there would be for Government, and thence Parliament, to ensure that it is operating in an effective way. I am not overwhelmed by the Minister’s response. I accept that there is an established principle and I presume that Nolan was the process that he was referring to as regards public deliberation. I do not know whether he wishes to consider that. I have no wish to press the amendment to a vote because I am well aware that it would prove a nonsense, but it would be helpful if the Minister reflected on clarifying which particular rules he refers to and whether he feels able to consider any advice that may be forthcoming. I beg to ask leave to withdraw the amendment.

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 23, in schedule 1, page 41, line 2, at end insert

‘no later than 30 days after its receipt’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss amendment No. 24, in schedule 1, page 41, line 25, at end insert

‘no later than 30 days after its receipt’.

Mark Prisk (Conservative, Hertford and Stortford)

These two amendments deal with our ability to hold the LBRO to account. Members of the Committee will realise that the annual report of the LBRO is the principal document that the House will have in order to consider the performance of the organisation that the Bill establishes. I am trying to ensure that our scrutiny is timely. I therefore wish to insert a phrase to both paragraph 12(5) and paragraph 13(6). Paragraph 12(5) of the schedule states:

“The Secretary of Sate must lay before Parliament a copy of each report”

—that is, the annual report—

“received under sub-paragraph (2)(a).”

My amendment would insert the phrase,

“no later than 30 days after its receipt.”

I am sure that it is not the intention of Ministers to unduly or deliberately lay such documents significantly later than that—six months or a year or so—but if we are to scrutinise these matters as a House, it is important that we have the documentation within a reasonable time. I think that 30 days is a perfectly reasonable time within which we could expect those documents to be forthcoming. If scrutiny is to be effective, it must be timely. I hope that the Minister will treat the amendments in a positive way, as these are matters that should be pressed.

Lorely Burt (Liberal Democrat, Solihull)

After listening to the argument made by the hon. Member for Hertford and Stortford, it seems entirely appropriate that the laying of the report before Parliament should be timebound. I will be pleased to support the measure, and perhaps the Minister could see his way to incorporating it within the Bill.

Pat McFadden (Labour, Wolverhampton South East)

The amendments are, quite fairly, concerned with ensuring that there is no undue delay in laying the accounts before Parliament. As the hon. Member for Hertford and Stortford noted, the relevant section of the schedule says:

“The Secretary of State must lay before Parliament a copy of each certified statement and report received”.

The amendments add a time limit on the Minister’s duty to lay a copy of the LBRO accounts before Parliament and the Welsh Assembly. In principle, we recognise the importance of timing in the interests of proper public accountability. The hon. Gentleman said that scrutiny was improved with speed—perhaps that was not quite the word, but certainly without undue delay—and our intention is for copies to be placed in the House as soon as the accounts have been signed off by the auditor. However, in practice, such time limits laid down in statute are uncommon. Although the hon. Gentleman is right to say that there should be no undue delay, it is accuracy that is ultimately important. The Government hope that the hon. Gentleman will not press the amendment, as a statutory deadline might work against the overriding objective of accuracy.

The wording of the amendment might unintentionally create inflexibility. The requirement to air the accounts in this way might mean that they could only be made available on dates when the House is sitting. That might make a 30-day deadline difficult to meet, for example, if accounts were presented early in the recess. We could even inadvertently cause a delay as we may need to refuse them in order not to fall foul of the statutory requirement. I am sure that that is not the hon. Gentleman’s intention, but the way that it might fall could inadvertently slow the process down.

In previous debates I referred to a couple of precedents, and I hope that the Committee will bear with me if I do so again. For example, the Natural Environment and Rural Communities Act 2006, which set up Natural England, does not set time limits for the agency’s accounts to be laid before Parliament. The Education (Schools) Act 1992, which set up Ofsted, also specified no time period for laying the chief inspector’s report before Parliament. I sympathise with the intent behind the amendment. The hon. Member for Hertford and Stortford is absolutely right: there should not be undue delay in these matters and the Government do want to see accounts dealt with promptly.

Mark Prisk (Conservative, Hertford and Stortford)

The Minister says that he accepts the principle behind the amendment. If the Government are willing to bring forward a different time period, or an adjustment in the words, I would be happy to withdraw the amendment. It may be that actually, the Minister does not want any time limit at all.

Pat McFadden (Labour, Wolverhampton South East)

I cannot promise the hon. Gentleman that I will bring forward a different time limit. While he is right to stress that the accounts should be laid before Parliament as soon as possible, the overriding objective must be accuracy and I would resist putting a number of days in the Bill. I hope that he will not press the amendment. If he does, I would ask my colleagues to resist him for that reason. However, I understand exactly his point about the desirability of avoiding undue delay. That is certainly the Government’s objective, but we also have the overriding objective of making sure that the accounts are right.

David Kidney (Labour, Stafford)

My hon. Friend will be asking us to vote no to a time limit. He has given a list of other Acts of Parliament that have a similar requirement with no time limit. Has a rule, a convention, a practice or a rule of thumb been developed under which there is a time that Departments aim for when they submit such documents to Parliament?

Pat McFadden (Labour, Wolverhampton South East)

My hon. Friend asks whether there is an informal rule outside 30 days. We certainly try to deal with matters each year before we go into recess. We do not do so by a number of days, but we try to avoid undue delay. The precedents that I quoted in respect of Ofsted and Natural England do not have such time limits. I completely agree with the sentiment of avoiding undue delay, but to put a number of days in the Bill might lead us, for the reasons that I have explained, to unintended consequences. I hope that accuracy would be accepted as the main objective, and if the accounts are accurate there should certainly be no undue delay in tabling them.

Judy Mallaber (Labour, Amber Valley)

In the event that the reports or accounts were published at the start of the summer recess. and thus would not be before Parliament for a period, would they still be published in some form so that people could see them or would that have to wait until Parliament sits again?

Pat McFadden (Labour, Wolverhampton South East)

My fear is that the effect of the amendment would be that if the accounts were coming to us shortly before the summer recess, we might say that we do not have the 30 days and that it would be better to receive them after the summer recess. That would cause an inadvertent and unintentional delay. I absolutely respect and agree that there should not be undue delay, but I am not quite sure that setting down a time limit of 30 days is the correct way to ensure that.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister and hon. Members for the debate because it is important that we can ensure that our scrutiny is effective. The presentation of documents to this place must therefore be timely. To say that something is uncommon is one of the weakest arguments that I have come across. It is uncommon, dare I say it, for England to win the World cup, but that does not necessarily mean that it is a bad thing—[Interruption.] I shall leave that to the Scots to debate among themselves. I have veered into dangerous territory. The fact that something is uncommon does not mean that it is bad. That was a fascinating but rather irrelevant argument.

The Minister said that he recognised the merit of the fact that we need to have documentation in a timely way. I do not buy the argument that somehow inaccuracy will result. We are discussing the annual report that the LBRO is required to present to the Secretary of State. We are not talking about a time limit for the LBRO to get its accounts right, but the time from when the Secretary of State receives the documents and when he or she decides to place them in the Library of the House of Commons. The accuracy argument does not work. It might work if it was about 30 days for the preparation of the accounts. That is a perfectly legitimate argument, but it does not work in the context under discussion.

I recognise fully that 30 days is not a perfect answer, but I accept that quite understandably Ministers wish to have no trammels on their ability to act. However, we should not simply accept that. The hon. Gentleman is an honourable man. I am sure that it would be his wish and intention to present the documents in time, but we might not necessarily be dealing with him. We need to think of future Ministers and other circumstances, and need to ensure that the House can pursue its scrutiny effectively. Unless he can offer me something that would show recognition with a time limit perhaps on Report, it is not my intention to withdraw the amendments.

David Kidney (Labour, Stafford)

The debate has raised an interesting point, and I am as surprised as the hon. Gentleman that major bodies, such as Ofsted and Natural England, send reports to the Secretary of State, who then apparently has no time limit at all in which to lay them before Parliament. That is a serious omission in Parliament’s administration. If we think of something such as a Select Committee report, Ministers are required by convention, rather than a rule, to reply within two months. That would perhaps get us over the Minister’s main objection about recesses. Does the hon. Gentleman think that if he presses the amendment to a vote in the Committee, whatever the result, maybe the Procedure Committee ought to be looking more generally at all such reports and a time scale for laying them before Parliament?

Mark Prisk (Conservative, Hertford and Stortford)

The hon. Gentleman is absolutely right to say that the House, beyond this Committee—I will not stray too far away—needs to think about how we can tighten up the procedures so that there is a process. I cannot believe that Whitehall is opposed to a process, although I can understand the wish to reserve a certain flexibility, but the hon. Gentleman is absolutely right, and that is why I wish not to withdraw the amendment, but to press it to a Division to proceed with the matter.

None

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 46, in schedule 2, page 43, line 30, leave out paragraph 3.

This is purely a probing amendment, so we seek not to delete, but to clarify. Paragraph 3 relates to matters of tax, including stamp duty land tax. Can the Minister tell us whether the effect of the paragraph is intended to be retrospective?

Pat McFadden (Labour, Wolverhampton South East)

As the hon. Member for Hertford and Stortford says, the provision is about the tax treatment of the LBRO as it becomes a statutory body. We are keen to make the transfer from the operation as a private company to a statutory body as smooth as possible. The creation of LBRO as a company last year has enabled a lot of good preparatory work to be done to make it ready for that transition. However, the Bill needs to provide for transfers to the statutory corporation when it comes into existence, and that involves the transfer of property, which would have tax consequences, whether through income or corporation tax, or stamp duty.

The transfer of assets and liabilities from the LBRO company to the LBRO could result in inappropriate tax consequences for the transferor or transferee, which would arise solely because of the transfer. For example, property transferred for no consideration could be treated as transferred at market value for capital gains purposes. Paragraph 3 addresses those consequences by providing tax neutrality. It ensures that a transfer will not give rise to a tax change or confer a tax advantage on either the transferor or the transferee. This is about ensuring that the transition between the private company and a statutory body can operate without unintended tax consequences. In terms of retrospection, I am not clear what the hon. Gentleman is driving at, given that we are talking about a transfer that is to take place if the Bill is approved by Parliament. The schedule deals with the tax implications of the transfer at the point that it takes place.

Mark Prisk (Conservative, Hertford and Stortford)

My concern is that the LBRO company will engage in a series of activities, assets and so on, possibly including real estate, which would, on transfer to the new body, create a potential tax liability—stamp duty land tax being the obvious example. Many of those taxes relate to the change in value from the original purchase. Does the measure address the liability at the point of transfer solely, or is it concerned with the tax matters since the incorporation of the LBRO company, and thus retrospective?

Pat McFadden (Labour, Wolverhampton South East)

My understanding is that there should not be an issue with the change in value of assets that the hon. Gentleman describes. I am happy to give him further detail about that, but the schedule deals with assets at the point of transfer. That is the key point. The schedule seeks to avoid unintentional or unwelcome tax consequences that could arise as the result of a move from a private company to a statutory body.

Mark Prisk (Conservative, Hertford and Stortford)

It is a hideously complex prospect, but one that it is important to clarify. I am grateful to the Minister for offering to write to me and, I presume, the Committee members, to clarify the matter. I appreciate that it may be something that is beyond his immediate knowledge. On that basis, I beg to ask leave to withdraw the amendment.

Clause 5

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 1, in clause 5, page 3, line 37, at end insert—

‘(d) in accordance with any Code issued from time to time under Section 22 of the Legislative and Regulatory Reform Act 2006 (c. 51).’.

Amendment No. 1 would insert a new paragraph (d) to clause 5. Its purpose is expressly to include Hampton principles in the LBRO’s objectives. The reason goes back to the origins of the Bill, namely, the Hampton review of regulatory enforcement. The principles include co-ordination, consistency of regulatory enforcement, a risk-based approach—targeting the rogues and not the individual who has made the odd error—and, most important, securing compliance with rules rather than just chasing prosecution. Those principles are supported by Opposition Members and by many businesses. Indeed, the amendment has the support of a number of businesses and their representatives, including the British Retail Consortium. Although I appreciate that subsection (2) lists some of those principles, it is neither explicit nor complete. The amendment would strengthen the clause, and I look forward to hearing the Minister’s reply as to why he thinks the reverse, or whether in fact he is only too delighted to accept the amendment.

Lorely Burt (Liberal Democrat, Solihull)

I am happy to support the Conservative amendment. It seems a sensible way of strengthening the intentions of the Bill.

Pat McFadden (Labour, Wolverhampton South East)

Clause 5 is important as it sets out the principles of better regulation to which the LBRO will have regard. As the hon. Member for Hertford and Stortford mentioned, subsection (2) sets out its functions stating that

“regulatory activities should be carried out in a way which is transparent, accountable, proportionate and consistent...targeted only at cases in which action is needed”.

Those of us with history in such debates are familiar with those five principles, which have become an important part of the policy framework regarding better regulation. The amendment deals specifically with the regulators compliance code, recently issued under section 22 of the Legislative and Regulatory Reform Act 2006. The scope of the code in respect of local authorities coincides closely with parts 1 and 2 of the Bill. It applies to local authorities in their exercise of trading standards, environmental health, licensing and fire safety functions. The LBRO will, therefore, take an interest in the performance of local authorities when delivering its duties under the code.

However, including a provision in the Bill that requires LBRO to ensure that local authorities act in accordance with it could cause confusion for businesses and local authorities. Although I understand the intention behind the amendment, its effect would be to place local authorities under two contradictory legal obligations. The provisions in section 21 of the 2006 Act and the legislative and regulatory functions order under which the code was issued, require local authorities to have regard to the code. Legally, that means that in certain circumstances, a local authority can take the code into account but decide not to apply it.

Amendment No. 1 would require LBRO to ensure that local authorities act in accordance with the code. Under that requirement, the circumstances in which a local authority could decide not to apply it are limited almost to none. It would be undesirable to have those two contradictory legal requirements running side by side.

Mark Prisk (Conservative, Hertford and Stortford)

I would like to clarify something. Subsection (2)(b) says

“regulatory activities should be targeted only at cases in which action is needed”.

Is it the Government’s intention—this may be helpful in the debate, certainly to those who are concerned about the matter—that the measure would seek to implement the full Hampton-compliant, risk-based approach?

Pat McFadden (Labour, Wolverhampton South East)

Certainly, these are known as the Hampton principles. They are an important guide for regulators and Government in framing regulation. My point and, to use more colloquial language, the Government’s view is that subsections 2(a) and (b) cover what should guide the functions of LBRO under the clause. Our problem is that amendment No. 1 would have local authorities not only having regard to LBRO, but acting in accordance with it, which would present them with two potentially contradictory legal requirements running side by side. It would require them to do that bit more by amending the objectives of a different body altogether. I am not sure that is the best way to legislate.

Mark Prisk (Conservative, Hertford and Stortford)

Is the Minister saying that the Government believe that, together, subsections (1) and (2) would require local authorities to be wholly compliant with Hampton? Is that correct or not? If it is correct, it would be immensely helpful.

Pat McFadden (Labour, Wolverhampton South East)

The provision requires local authorities to conduct their business according to the five principles set out in the clause. I hope that I have been helpful to the hon. Gentleman.

Mark Prisk (Conservative, Hertford and Stortford)

I think that we have got there in the end. The purpose of the amendment was to establish explicitly what would happen. I fully understand that subsection (2)(a) on the key points of transparency, accountability, proportionality and consistency is important, but the risk-based issue is unclear under subsection (2)(b). Several businesses that will be affected by the provision have wanted matters clarified. The Minister may have just provided that clarity, and I am grateful to him for that. In a charitable sense, I say that the hon. Gentleman has made progress by covering such matters, and I beg to ask leave to withdraw the amendment.

Lorely Burt (Liberal Democrat, Solihull)

I beg to move amendment No. 49, in clause 5, page 3, line 42, at end add—

‘(c) regulatory activities should be carried out on the basis of a risk assessment of the regulated person which should include their propensity to comply with the regulation.’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss amendment No. 50, in clause 13, page 7, line 9, at end add—

‘(c) regulatory activities should be carried out on the basis of a risk assessment of the regulated person which should include their propensity to comply with the regulation.’.

Lorely Burt (Liberal Democrat, Solihull)

The Hampton review recommended that all regulatory activity should be based on a clear, comprehensive risk assessment. The LBRO should have the power to ensure that any sanctions or inspections should follow a risk assessment via the regulator or local authority. If they target those that present high risks, it would give more freedom to target rogue traders. It would free up resources and it would reward compliant companies with a light-touch regime, which is the reasoning behind the amendment.

Pat McFadden (Labour, Wolverhampton South East)

We are in similar territory to that of the previous amendment. Under clause 5, LBRO is required to secure that local authorities exercise their functions in a way that is effective, does not give rise to unnecessary problems and complies with the five principles under subsection (2) that we discussed a moment or two ago. They are the principles of better regulation, which inform policy in such areas, and they are becoming increasingly integrated into the legislative framework for regulators. They feature, for example, in Ofcom’s primary legislation and many regulators are required to have regard to them under the Regulatory Reform Act 2001.

I agree with the hon. Lady that the assessment of risk should be at the heart of regulatory activity, but so should many other commendable practices, such as giving clear advice to those who are subject to regulation and others, too. I am not sure that it is wise to single out this particular issue when the principles of good regulation already address the point. In particular, subsection (2)(b) says:

“regulatory activities should be targeted only at cases in which action is needed.”

The key ideas behind the five principles are probably targeting and proportionality, reflecting the view that regulation should be based on an assessment of risk. The Better Regulation Task Force publication “Principles of Good Regulation” expanded on the principles and on the best means of implementing them in practice. The guidance covers the issues raised in the amendments, and it may help the hon. Lady if I quote from it. The guidance says that targeting, for instance, demands that enforcers should

“focus primarily on those whose activities give rise to the most serious risks.”

The issue is therefore covered in Government guidance.

The inclusion of the principles in clauses 5 and 13 deals with the issue raised in the amendments and makes them unnecessary. I hope that that gives the hon. Lady some reassurance that a risk-based approach is very much built into clause 5.

Lorely Burt (Liberal Democrat, Solihull)

I am grateful to the Minister for his explanation of where else in the Bill I should seek reassurance that the risk-based approach is included. With that reassurance, I beg to ask leave to withdraw the amendment.

Clause 6

Pat McFadden (Labour, Wolverhampton South East)

Clauses 6 and 7 are important to the functioning of the LBRO, so I hope that the Committee will not mind if I delay it for a short time to set out some of the issues.

Clause 6 gives the LBRO the power to issue guidance to local authorities setting out how they should exercise their relevant functions. Once again, the clause requires authorities to “have regard” to guidance given under it. It will give the LBRO the right to disseminate best practice on the full range of trading standards, environmental health, licensing and fire safety regulations that come within the scope of part 1. That will be critical to the LBRO’s objective of promoting better regulation at a local level.

That means, for example, that the LBRO could issue guidance to all local authorities regarding best practice in implementing legislation on trading standards. It could also issue guidance to a select number of local authorities regarding their approach to the implementation of risk-based regulatory enforcement, which we have just discussed. Equally, it could issue guidance to one authority regarding its approach to encouraging compliance among small businesses. Before the LBRO can issue guidance, however, the clause requires it to consult business or business representatives, local authorities and such other persons as it considers appropriate.

That guidance function is important and goes beyond the referee or arbitration function, which I am sure that we will discuss in part 2. Indeed, one of the key reasons for setting up the LBRO is that there is currently a gap in the provision of sufficiently clear guidance to local authorities about how legislation is to be interpreted and enforced. The clause is therefore important.

Clause 7

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 2, in clause 7, page 4, line 24, leave out ‘LBRO’ and insert ‘The Secretary of State’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss the following amendments: No. 3, in clause 7, page 4, line 24, leave out first ‘it’ and insert ‘he’.

No. 4, in clause 7, page 4, line 30, leave out subsection (2).

No. 5, in clause 7, page 4, line 32, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 6, in clause 7, page 4, line 36, leave out ‘(2) or’.

No. 7, in clause 7, page 4, line 37, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 8, in clause 7, page 4, line 41, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 9, in clause 7, page 5, line 1, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 10, in clause 7, page 5, line 1, leave out ‘it’ and insert ‘he’.

No. 11, in clause 7, page 5, line 2, leave out ‘it’ and insert ‘him’.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for his remarks on clause 6. They are also relevant to clause 7, so it is helpful to have them on the record.

Clause 7 gives the LBRO the power not merely to offer local authorities guidance, which the Minister referred to, but to direct them. As such, it creates a significant precedent: namely, that a public body that is not directly accountable to this House can direct any of our local authorities in relation to more than 140 enactments. If Committee members have not yet had the chance, it would be worth looking at schedule 3 on page 44, which shows the number of pieces of legislation that we are dealing with. The gamut of legislation ranges widely through employment, criminal justice, the environment, animal welfare, antisocial behaviour, licensing, local government, mining and office arrangements.

Pat McFadden (Labour, Wolverhampton South East)

The hon. Gentleman is right that a large number of enactments are listed under schedule 3. It is important to clarify for the Committee that those encompass the key functions of local authorities with regard to regulation. They could be brought together under the headings of trading standards, environmental health, licensing and fire safety. Schedule 3 is the Government’s way of illustrating the enactments that cover the key headings for local authority enforcement. There is coherence in what is encompassed by schedule 3.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful for that information. The Minister is right to say that it is a helpful list. That is why I wanted to draw it to the attention of the Committee. There is a natural assumption that we are dealing with the Bill before us and no other legislation. However, we are dealing with a series of Acts that deal with the involvement of local authorities. My point is that the Bill has wide-reaching implications and that it could undermine local democracy.

The proposal has understandably attracted considerable concern, not least when it was debated in the other place. It was notable that not just peers from my party, but those from all parties represented on the Committee and from the Cross Benches expressed their concern about the potential effect of the Bill. Lord Eccles rightly questioned Ministers about the reasoning behind the unprecedented nature of this step.

For the benefit of the Committee, I will clarify what has happened in this area. As I understand it, to date directions have been Executive orders made by Ministers, usually as a last resort and limited to administrative matters. Those Ministers are directly accountable to this House. I have no problem with that process because it is targeted and accountable.

In response to the criticism of this measure, Ministers in the other place argued that it is not a precedent. They argued that the food Act established the rules in this matter. That Act allows the Food Standards Agency to issue directions to local authorities about the implementation of that Act. To date, the FSA has issued a code of practice concerning EU and UK regulations, but no direction has been issued. Such arguments that have been put forward by Ministers are therefore incorrect.

The food Act is very different from the Bill before us. It permits directions only about the law. The Bill will permit the LBRO to direct all of our local authorities with regard to its guidance. That is a very different matter. In my view the situation is compounded by the LBRO being largely untested as it is a new organisation and its guidance being unpublished. We have no means of judging how its directions might work, yet we are being asked to grant the power in advance.

That brings me to the amendments. In some ways, I would prefer to delete the clause altogether, but we try on the Conservative Benches to be positive and to improve legislation where we can. I am offering the Minister a compromise. Instead of simply scrapping the clause, amendments Nos. 2 to 11 would switch the power of direction back into the hands of the Secretary of State. That would at least create proper accountability, given that the powers potentially affect every one of our local authorities in relation to 140 different pieces of legislation.

This is a positive set of amendments. I look forward to hearing the Minister explain why the power of direction is needed and why, for the first time, a non-departmental public body is being granted such a power in advance.

Lorely Burt (Liberal Democrat, Solihull)

I tabled an amendment to delete the clause, but although the amendments are something of a compromise in transferring the LBRO powers to the Secretary of State, I would be happy to support the hon. Member for Hertford and Stortford if he decided to press them to a Division. It is fair to say that none of us is happy with giving directive powers to non-elected bodies over elected bodies—in other words, over local authorities.

Clause 6 gives the LBRO the power to issue guidance to local authorities on the exercise of their regulatory functions. Local authorities are required to have regard to such guidance. In addition, every local authority has to have a published enforcement policy, and will be required to comply with the new statutory regulations compliance code, which requires them to exercise their regulatory functions in a clear, proportionate and transparent manner. We therefore believe that clause 7 is not necessary.

If a local authority does not pay due regard to the guidance issued by the LBRO, a range of mechanisms are already available to the LBRO, another local authority or a regulated person or entity in order to hold them to account for any failure. Those mechanisms include legal appeal mechanisms if the failure results in any form of enforcement action, and the corporate complaint procedures that every local authority is required to publish; and there is the independent local ombudsman.

Clause 7 was amended in the other place to add subsection (4), which requires directions that affect more than one local authority to be subject to the negative procedure; it also added subsection (5)(a), which requires the LBRO to consult the local authority that it intends to direct before issuing the direction. Under subsections (2) and (3), the LBRO must obtain the consent of the Secretary of State or Welsh Ministers before issuing a direction.

However, none of those safeguards alters the fact that, because local authorities have to have regard to LBRO guidance under clause 6, the possibility of issuing directions will arise only if authorities have good reason for acting differently. It is most likely to arise if the authority feels that the LBRO guidance runs counter to its statutory obligations. The power could therefore give rise to lengthy legal difficulties over whether its guidance can take precedence over an Act of Parliament.

Pat McFadden (Labour, Wolverhampton South East)

I begin by agreeing with the hon. Member for Hertford and Stortford that clauses 6 and 7 go together and are probably best seen in the same light. Our discussion takes me back to the first question that the hon. Gentleman asked this morning, which was whether I and the Government were confident that a relatively small organisation such as LBRO would have the teeth to do the job. That is what clause 7 is about.

One obviously believes that guidance will mostly be observed, but if not the question is whether there should be a power to issue directions in some circumstances. It is intended to be a backstop power that might be used, for example, where one or more local authorities persistently disregard a particular piece of guidance to the detriment of business or the general public.

The LBRO may use the power only with the consent of the Secretary of State or Welsh Ministers and after consultation with the local authorities to whom the direction is being given, any relevant regulator and such other persons as LBRO considers appropriate, including, for example, representatives of bodies such as the Trading Standards Institute or the Chartered Institute of Environmental Health. Where LBRO gives direction to two or more local authorities, ministerial consent must be given in an order. I believe that that provision came about partly as a result of the recommendations of the Delegated Powers and Regulatory Reform Committee, which was keen to ensure proper procedures for issuing such directions. There was considerable debate on the issue in another place. The clause has been amended to take account of those discussions, and I think that it has been improved by it.

The argument is that the powers are unprecedented and that there is a lack of democratic accountability in how they work. To give a bit of background, we started consulting on them last year. The consultation made it clear that a number of stakeholders were concerned to ensure that the body would have real teeth in carrying out its functions. We proposed the backstop power to be used in circumstances like the ones that I have outlined.

The hon. Member for Hertford and Stortford took issue with the comparison with the Food Standards Agency quoted in this debate. It is not an exact parallel, but it is the closest precedent. Under section 40 of the Food Safety Act 1990, the agency may give directions to a local authority to take steps to comply with a code of practice, much as the LBRO may require a local authority to comply with its guidance. It is also true, however, that the Food Standards Agency has extensive other powers to which LBRO will not have access: for example, the power to audit local authorities’ performance of their functions or even to take over the management of local authorities’ relevant functions directly at the request of the Secretary of State. I am not sure that what is proposed in the measures is a constitutional precedent that goes beyond what happened before. It is important and right that clause 7 should contain safeguards, partly in response to some of the concerns raised.

The use of the powers of direction is subject to the consent of the Secretary of State. The example quoted from the Food Standards Agency is weaker, as the Food Standards Agency must only consult the Secretary of State. That falls short of the strict requirement in the clause to secure the Secretary of State’s consent. LBRO, as I said, must also consult any local authority subject to directions, and parliamentary approval will be required where the directions affect more than one authority.

The amendments tabled by the hon. Member for Hertford and Stortford would transfer the power from LBRO directly into the hands of the Secretary of State. The issue is clearly one of democratic accountability and ensuring that LBRO gives directions to local authorities in a proper way. He believes that that should be done only by an elected person. We believe that the requirement in clause 7 for ministerial consent is an important democratic safeguard. Hopefully, it will have the effect that he wants, which is to secure democratic accountability in the exercise of the power. LBRO will be able to propose directions, but the decision to approve their use will rest firmly with Ministers. From the accountability point of view, the effect would, in the end, be the same because Ministers would effectively be responsible for any use of the directions. However, the amendments would make the provision work in quite a different way because transferring the power to direct into the Secretary of State’s hands would undermine LBRO’s position as the expert body on regulatory guidance, and would place the Secretary of State in a more active decision-making role. Although he might, of course, argue that it is open to LBRO to give advice to the Secretary of State on when or whether to direct, making the Secretary of State the decision maker would change the way in which LBRO’s role is perceived in practice. Doing so would ultimately undermine the provision, which is importantly and rightly surrounded by proper democratic safeguards.

The provisions in clause 7 are important to enable LBRO to achieve its objective, and sufficient safeguards are in place to ensure that LBRO uses its power to direct compliance with guidance in a responsible manner. The idea of direction has support from a number of groups. I shall quote one or two of them. For example, the British Retail Consortium said:

“In our view, the LBRO should be able to decide the strength of the guidance—i.e. it should decide whether authorities must comply; whether they should have regard to the guidance; or whether it is merely advisory.”

It is not just business groups that say such things; the National Consumer Council has said:

“Although we recognise the concerns of local authorities, we consider this measure is necessary to ensure that consumers do not experience a postcode lottery.”

The Trading Standards Institute has stated:

“TSI believes...it is necessary that LBRO has the power to direct local authorities that are at odds with central guidance in order to ensure a consistent regulatory environment.”

The CBI said.

“we would welcome moves to maintain the powers of the Local Better Regulation Office (LBRO). Business has been promised a better regulatory environment if regulators are awarded new powers. But this requires regulators to deliver on this, and we think it important that the LBRO is given the appropriate powers to ensure that local authorities do just this. Maintaining Clause 7 as currently drafted, which gives the LBRO powers of direction, would help achieve this”.

So, a significant number of voices are saying not just that there should be a power of direction, but that the LBRO should be the body using that power.

Judy Mallaber (Labour, Amber Valley)

My hon. Friend referred to the National Consumer Council. Will there be provision for consumer organisations to be consulted as part of the process, because that is not in the Bill? There has been concern that businesses get consulted but that the consumer’s voice does not get heard.

Pat McFadden (Labour, Wolverhampton South East)

That is certainly possible. I refer my hon. Friend to subsection (5), which states:

“Before giving a direction under this section LBRO must consult—

(a) the local authorities in England or Wales to whom the direction is to be given;

(b) any relevant regulator, and

(c) such other persons as LBRO considers appropriate.”

So, it is certainly open to the LBRO to consult the National Consumer Council—although I do not pretend that that is written in the Bill in every instance.

I am coming to the conclusion of my remarks. I quite understand why both the hon. Members for Hertford and Stortford and for Solihull asked questions about the power for an organisation, such as LBRO, to direct local authorities. What is the Bill about in the end? It is about ensuring that there are teeth in the better regulation effort at a local level. It is fair for hon. Members to say that with teeth should come some democratic accountability. As drafted, clause 7 meets that democratic test without setting up a system that hampers the LBRO’s work. It contains provisions relating to consultation, and the consent of the Secretary of State, and provisions for consent to be given by order where a certain number of local authorities are involved. That is the balance that we have to strike in the clause.

The powers do have some precedent in the example that has been quoted. I believe that business wants these powers and other organisations such as the Trading Standards Institute and the National Consumer Council have also said that they support them. The amendment would not provide a gain in terms of democratic accountability—that is a fair question to ask, but it is something that we have covered. The amendment might actually make that more difficult to operate, not in everyday situations, but on those occasions when guidance is not enough and it is necessary to exercise the teeth that we began today’s proceedings by calling for.

Mark Prisk (Conservative, Hertford and Stortford)

It has been a useful debate, but I am not convinced by the Minister’s arguments. He is right to say that the clause has been significantly improved. It was improved in the other place by the efforts of Members of that House and there are certain measures, which he has referred to, that have made it a better clause. However, there remains the question of a precedent. He has only been able to cite one example: the Food Standards Agency. As I have demonstrated, that agency seeks to direct the implementation of an Act, not of guidance, and that is an important difference. Unless he has three other good examples, I have not heard from him where this is not a precedent. We remain clear, therefore, that although the example that has been offered has some relevance, it is not directly the same, and that therefore a precedent has been established.

What about the question of teeth? The purpose of my amendment is not to remove the power to direct—it could be quite legitimately argued that that would remove the teeth. To continue the metaphor, and I shall probably stop it at that point, the teeth remain. I am concerned with how they are harnessed and the accountability. The clause already asks that where the LBRO seeks to make a direction, it goes to the Secretary of State. That does not solve the problem that although that body is accountable to the Minister, it is not accountable us in this House. I understand, therefore, that business will take the view that it does and I do not disagree with that view. Looking at how businesses responded to the Bill, I have a string of quotes here about their concerns about it. The CBI, which the Minister referred to, said on 21 May:

“This Bill requires business to take a leap of faith: it proposes that regulators be awarded additional powers to sanction business in exchange for the promise of a better regulatory environment.”

We could trade quotes as to who is in favour of which bit or whatever; the fundamental question is whether this power needs to be in the hands of an unaccountable non-departmental public body.

For the first time, we have no sight of the guidance that we are supposed to be providing direction powers for. We are not able to say that this is a long-standing, tried and tested public body that is known to this House, that has established principles and procedures and with which we are familiar. We are being asked in advance to give a body with which we are not familiar, which is not directly accountable to us, the ability for the first time to give directions on its guidance and not on legislation. There is a fundamental difference with any precedent that has been established. On that basis, I am not convinced by the Minister’s arguments and I therefore seek to press the amendment.

Clause 9

Pat McFadden (Labour, Wolverhampton South East)

I do not want to delay the Committee unnecessarily. We have been talking all morning about the job that LBRO is set up to do and whether it fills gaps in the current regulatory market. One such gap is regarding advice to Ministers, which is covered by clause 9. The Hampton review recognises that many of the difficulties that regulatory enforcement poses for business, arise not from any failing by the local authorities, but from the complexity of the system that they sit at the centre of.

We expect that LBRO will work to bring better co-ordination and intelligence to the way that Government Departments and the national regulators work together in setting the framework for local authority enforcement. LBRO will have an insight into how regulation is enforced by local authorities from the perspective both of those local authorities and the businesses subject to the regulation. It is important that the body has the power to advise Government on such matters, and perhaps to challenge the various players in the field in order to make the system more coherent and streamlined. Clause 9 provides such a power and makes provision for LBRO to

“give advice or make proposals to a Minister of the Crown”

regarding the way that local authorities exercise such functions, the effectiveness of the legislation, whether it would be appropriate for other regulatory functions to be exercised by local authorities and other matters relating to that. That is part of LBRO’s job, and its advice function will be an important one.

Judy Mallaber (Labour, Amber Valley)

This is potentially an extremely useful part of the Bill. Will my hon. Friend advise us on how open it would be for local authorities to use this measure to express their concerns about regulatory functions? For example, will they be able to talk about the way that other Government agencies, besides those with which they are directly involved, exercise their regulatory functions, or will they be able only to comment and pass advice via LBRO back to Ministers specifically in relation to their own regulatory functions? Potentially, it could be an extremely useful mechanism that provides a sounding board and guidance to Ministers across a broad range of issues in relation to a regulatory regime that impinges on a local authority’s constituents.

Pat McFadden (Labour, Wolverhampton South East)

My hon. Friend is absolutely right. The local authority voice is very important. As I have tried to explain, in LBRO we seek something that sits at the centre of the regulatory system, which involves central Government, local government, regulators and business. Sitting at the centre of the system, LBRO will have an important advice function. The local authorities that LBRO will deal with on a day to day basis will be able to raise any relevant issue—as in fact they already do in LBRO’s current form of a company, and I am sure that that role will continue. The advice function is important, which is why I wanted to draw it to the attention of the Committee.

None

Pat McFadden (Labour, Wolverhampton South East)

This clause is also important because it deals with the priorities for regulation at a local level. Over the years, different priorities have been given to local authorities to enforce. Local authorities have said to us in the past, quite fairly, “We are being asked to do a lot of different things. A list of things that we are asked to do by all the different Departments would be long.” With that in mind, the Government recently asked Mr. Peter Rogers to conduct a review of the different local authority enforcement priorities, and to give some sense of priority to the priorities, if I may put it that way. He produced an extremely valuable list, and the clause will ensure that it is updated over time.

It states:

“LBRO must...publish...a list specifying matters to which a local authority...should give priority when allocating resources”

and that local authorities

“must have regard to the appropriate list”.

Of course, rightly, subsections (5) and (6) state:

“LBRO may not publish”

such a list

“without the consent of the Secretary of State”

or, when relevant,

“without the consent of the Welsh Ministers”.

I do think that this is an extremely—

Mark Prisk (Conservative, Hertford and Stortford)

On a point of order, Mr. Chope. The Minister is referring to a list of lists. It sounds fascinating, but I am not privy to it, and I do not know whether other Members are, including the hon. Member for Solihull. We are not aware of what is on the list of lists, and it would helpful if it could be made available to the Committee.

Christopher Chope (Conservative, Christchurch)

That must be a matter for the Minister.

Pat McFadden (Labour, Wolverhampton South East)

Absolutely. This is a public document, so I am happy to furnish the hon. Gentleman and other members of the Committee with the fruits of Mr. Peter Rogers’s work.

The clause is important because it was a valuable piece of work. Local authorities will welcome some sense of what they are expected to concentrate on. The clause gives LBRO the job of ensuring that the list is kept up to date, but I am happy to furnish the hon. Gentleman with a copy of Mr. Rogers’s report.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for agreeing to provide us with that report, not least because one of my questions was how prescriptive such a list would be. Clearly, the Minister is ahead of the legislation.

I agree that clause 11 is important, but will the Minister say where there could be dilemmas? In particular, if a local authority has chosen to focus on a particular problem in its area, why should the LBRO interfere, and how would it do so? That question would certainly be asked by some of our constituents.

Let us take, for example, Wolverhampton, given that it is familiar to the Minister. If the good burghers of Wolverhampton felt that sorting out bad licensees was their No. 1 priority, how would the requirement to “have regard to” a national list work? Who resolves whether or not Wolverhampton is completely ignoring the aforementioned list of lists because it is determined to resolve bad licensees? How does Wolverhampton allocate its resources to square the circle that the Minister described? On the one hand, it must be able to deal with the problems that it faces in its own area and, on the other, to “have regard to” what would clearly be national priorities. Who resolves such a conflict?

Pat McFadden (Labour, Wolverhampton South East)

The phrase “have regard to” is the key to the problem. The measure is not a power of direction like the one we discussed in our debate on clause 7. It says to local authorities, “The Government understand that you are often asked to do many different things by different Departments. We hope it will be helpful if we publish a list of all the things that we want you to have particular regard to, to give you some sense of priority.”

The hon. Gentleman used the example of the fine city of Wolverhampton and circumstances when a Wolverhampton council would wish to prioritise licensing. As coincidence has it, licensing is one of the areas highlighted by Peter Rogers. The others were air quality, hygiene of food businesses, improving health in the workplace, fair trading, and animal and public health. I do not wish to rest the case just by saying that the example that he cited happened to be on the list. Let us say that Wolverhampton wished to do something that was not one of those six priorities.

We are not talking about the power of prohibition, but the list is a welcome guide to Wolverhampton city council and other local authorities saying, “Of all the different things that central Government ask us to do, what do they really think that we should be spending our time on in enforcement?” It does not prohibit a local authority from looking beyond the list and saying that the six areas are fine, but they have a problem with area No. 7. The list is not a prohibition. It is something that may change and evolve over time, which is why clause 11 is part of the Bill.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister. When focusing on the delightful city of Wolverhampton, it is such a pleasure to hear the gentle lilt of the Wolverhampton accent.

As for Wolverhampton’s priorities, one of the issues that we looked at under clause 7 was the power of direction. Can the hon. Gentleman confirm that that power does not relate to anything under clause 11?

Pat McFadden (Labour, Wolverhampton South East)

The hon. Gentleman will be aware that the local football team in Wolverhampton is called the Wanderers, so perhaps I am not the first wanderer to have arrived in the city.

Clause 7 does not apply to the Rogers list. It is not a power of direction. It does not apply in that way. I shall not go over the ground again. The Rogers list and that sort of exercise is valuable to local authorities, and the provision is about making sure that that value is maintained as time goes on.

Clause 12

Mark Prisk (Conservative, Hertford and Stortford)

I want to pursue the relationship between the LBRO and other regulators. The clause does not deal with local authorities, but other regulators such as the Environment Agency, the Food Standards Agency, the Gambling Commission, the Health and Safety Executive and the Office of Fair Trading. We all know that those bodies all have other duties beyond the specific regulatory matters dealt with under the Bill. To put it briefly, what happens when the LBRO’s priority or guidance is perceived by those regulators as being contrary to their work or in danger of being in conflict with other duties? A classic example could be the Environment Agency, which clearly has other duties under law beyond the immediate regulatory issues that are before us.

Pat McFadden (Labour, Wolverhampton South East)

There are two main points to make about the clause. Subsection (1) states:

“LBRO and a regulator to which this section applies must enter into a memorandum of understanding with each other as to how they will work together”.

The clause then lists the regulators under subsection (2). Organisations such as the Environment Agency and the Food Standards Agency are major national regulators. They were keen to establish that, when LBRO was set up, there was an understanding of how they should work together. It is envisaged that the documents will set out the ground rules for mutual consultation and so on.

My second point is that the clause is permissive in the sense that other MOUs could be conducted with other organisations. The hon. Gentleman also asked what would happen if a conflict arose, the bone of his question. I stress that the organisations listed would retain their statutory independence. They will have to discuss matters maturely. I do not want the hon. Gentleman to feel that there will be some kind of takeover of these organisations by the LBRO. We are talking about memorandums of understanding, and the organisations concerned will retain their statutory independence under the clause.

Clause 15

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 27, in clause 15, page 7, line 38, leave out subsection (6).

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss the following amendments: No. 28, in clause 15, page 8, line 1, leave out subsection (7).

No. 29, in clause 16, page 8, line 25, leave out subsection (6).

No. 30, in clause 16, page 8, line 28, leave out subsection (7).

Mark Prisk (Conservative, Hertford and Stortford)

These are merely probing amendments, and I do not intend to press them further, but I do want to ensure that there is a degree of clarity.

On clause 7, with regard to guidance, we debated the precedent of a non-departmental body being able to use directional powers. Clause 15 prohibits the Secretary of State from directing the LBRO with regard to its clause 7 powers. I wanted briefly to explore with the Minister the thinking behind that exclusion.

Pat McFadden (Labour, Wolverhampton South East)

Part 1 specifies two distinct direction-giving powers. The first, which we have discussed, is LBRO’s right to give local authorities directions to comply with guidance under clause 7. The amendments deal with the second power, which relates to a Minister’s right to give directions to LBRO. It is intended as a reserve power. LBRO needs to be independent, but as the hon. Gentleman rightly said on an earlier point, Ministers remain accountable to Parliament for its work. If we found ourselves in a situation where LBRO was acting against the public interest, we would need to exercise such a power. It is unlikely that the power will be used, but it is perhaps prudent to have it in case it is needed.

The issue was included in response to a recommendation by the Delegated Powers and Regulatory Reform Committee. The Committee drew attention to the potential uses to which the two directional powers could be put in combination. It was concerned that Ministers could direct LBRO to direct multiple local authorities and that that would give the power a quasi-legislative character. It felt that the issue needed to be dealt with and recommended that parliamentary scrutiny be applied where LBRO used its directions for more than one local authority and where Ministers had instructed it to do so. Following amendments to implement those recommendations, both can be done only with parliamentary approval. Ministers are unlikely to use their direction-giving power in the sense that I have set out, but a safeguard should be in place.

I hope that clarifies that, in phrasing the clause in the way that we have, we are responding to concerns raised by the Delegated Powers and Regulatory Reform Committee.

Mark Prisk (Conservative, Hertford and Stortford)

That was a very helpful explanation, not least because it is now on the record and will help people to understand the distinction that the Minister has just made. It is interesting that the Government felt it right to have accountability directly to Parliament for directions in this instance but not in another instance. However, the Minister’s comments were helpful, and I beg to ask leave to withdraw the amendment.

Clause 17

Pat McFadden (Labour, Wolverhampton South East)

It is often said when we establish new bodies that we should include some kind of mechanism to review how they operate, and that is what the clause does.

The Government’s impact assessment process requires that all new policies be reviewed to establish their actual costs and benefits and the extent to which the aim behind them has been achieved. The clause commits us to carrying out such a review after three years. It places that commitment on a statutory footing and requires the Secretary of State to review LBRO’s discharge of its functions three years after part 1 of the Bill comes into force. The review should consider whether LBRO is discharging its functions effectively and the extent to which it has attained its policy objective.

Again, the Secretary of State must consult Welsh Ministers and such other persons as he considers appropriate when he conducts the review. The clause is prudent, and it is correct to include it when establishing a new body of this type.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for those remarks. I think that he will acknowledge that the clause represents a significant concession that the Government made in the other place, both in agreeing to our request for a review after three years and in ensuring that that review is laid before both this House and the National Assembly for Wales. I commend my noble Friends for their work in improving the Bill significantly.

Lorely Burt (Liberal Democrat, Solihull)

I particularly welcome this clause. The three-year review makes this quite close to being a sunset clause, for which my party has been calling for a considerable time. We would like reviews to be built into a great deal more Government Bills and regulations.

Clause 18

Pat McFadden (Labour, Wolverhampton South East)

I do not want to detain the Committee, but I do not think that the review makes clause 17 a sunset clause, as the hon. Member for Solihull said. Perhaps clause 18 comes closer to being a sunset clause, although it is not one in the normal understanding of the term.

The clause provides the power to dissolve LBRO. It will be an organisation with ambitious objectives, but it is possible that a day will come when its work has been achieved. As another matter of prudence in such legislation, the clause makes provision for the dissolution of LBRO by way of an order subject to the affirmative resolution procedure. That order could also make provision for the transfer of property rights, liabilities and so on to another person.

I do not want to draw attention to the end of LBRO while we are debating its establishment, but in legislation of this kind it seems prudent to include a provision that allows for the power to wind it up at some point in the future should the Government judge it necessary.

Mark Prisk (Conservative, Hertford and Stortford)

I do welcome the provision being put in the Bill, not because there is necessarily an ulterior motive but because it is important that all eventualities are incorporated. Whether this is a sunset clause, a late afternoon clause or a dusky clause, whatever description one might want to give it, it provides an important power and I welcome it.

Clause 22

Pat McFadden (Labour, Wolverhampton South East)

It is probably prudent to pause for a moment at this point to talk about part 2 of the Bill, to which clause 22 takes us.

So far we have discussed the establishment of the LBRO. We have discussed its powers in relation to advice and guidance to local authorities; we have discussed the make-up of its board, payments to its members, and so on. Part 2 takes us into slightly different territory: its application to regulated persons that carry out an activity in two or more local authorities. This speaks to the very heart of the Hampton report.

We began this morning’s deliberations by talking about two issues identified by the report as problems in the regulatory system as applied at a local level. One of those problems was inconsistency and the other was inflexibility. Inconsistency is at the heart of part 2 of the Bill. Clause 22 limits access to the primary authority scheme to persons—be they business, charity or other organisation—that are regulated by more than one local authority. The intention is to include multi-site retailers and businesses that operate indirectly across local authorities, including, for example, internet sales operations and manufacturers whose goods are sold by another party in a number of local authorities. It will also include some franchises, where the franchisor has extensive control over the compliance standards of its franchisees.

Mark Prisk (Conservative, Hertford and Stortford)

If an internet business is based offshore, but trades across that, would I be right in assuming that it would not be incorporated?

Pat McFadden (Labour, Wolverhampton South East)

My instant response is that he would be right. This can be directed only at businesses that operate in the UK. It is, however, intended to cover businesses that operate in a number of different local authority areas in the UK.

Mark Prisk (Conservative, Hertford and Stortford)

The Minister said “the UK”. If we had a business in Aberdeen, would the point I made be the same? My understanding is that this is principally to do with England and Wales. Will the Minister clarify that?

Pat McFadden (Labour, Wolverhampton South East)

That is not quite right. Part 2 of the Bill has a different territorial scope from part 1, and the business in Aberdeen would be covered by part 2 of the Bill, although it would depend to an extent on whether the regulatory function was a reserved or a devolved matter. We may debate this at greater length if the hon. Gentleman wishes, but on the basic point of territorial extent, part 2 of the Bill extends to Scotland and Northern Ireland in a way that part 1 does not.

Mark Prisk (Conservative, Hertford and Stortford)

I do not necessarily need to delay the Committee by deliberating on the matter, but if it were the Government’s wish to clarify it at some point in due course, perhaps in writing, members of the Committee and those seeking to understand this legislation might find that helpful. There is a danger of a little lack of clarity, and while I appreciate that a response may not be at the tip of the Minister’s tongue, it would be helpful.

Pat McFadden (Labour, Wolverhampton South East)

I am happy to do as the hon. Gentleman asks, but I will also point him to clause 24, which defines “relevant function”, and under subsection (3) states:

“An order under subsection (1)(b) may not specify a regulatory function so far as exercisable in Scotland, if or to the extent that the function relates to matters which are not reserved matters.”

There is a similar provision for Northern Ireland. So there is clarity in the Bill in terms of its territorial scope.

I would also refer him to the—hopefully helpful—guide to the Bill produced by the Department, where on page 7 the territorial scope is very clearly set out. It says that part 1 applies only to England and Wales, and this means that LBRO may issue guidance to which local authorities in both England and Wales must have regard. Parts 2, 3 and 4 apply in England and Wales, and there are specific procedures for matters in Wales in respect of which Welsh Ministers exercise functions that we have touched on. Parts 2, 3 and 4 also apply in Scotland in respect of matters that are reserved, and in Northern Ireland in respect of matters that are not transferred. The Bill therefore has a significantly different territorial scope in parts 2, 3 and 4, compared with part 1. I hope that that clarifies the situation; it is set out in both the guide and the Bill.

May I return briefly to clause 2? As I was saying, the clause and part 2 in general, set out the relationship that we wish to establish between multi-site businesses and the local authorities that regulate them. We shall come on, I am sure, to discuss primary authorities, enforcement authorities, and LBRO’s role in ensuring that that relationship works as smoothly as possible. This is a difficult area that was at the heart of Hampton. We are trying to ensure consistency in enforcement in a way that respects both local authority and, in a way, ensures that businesses get the clarity that they desire from the regulatory system. This is attempting to address the problem of inconsistency, which was a very important point emphasised by Hampton in his report.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for those remarks, which I hope will clarify matters for those whom they will affect. The Minister is right to say that part 2 of the Bill, of which clause 22 is the first clause, seeks to aid businesses that trade in more than one local authority area. The most obvious example of the national business that we would think of is Tesco, which trades in hundreds of local authority areas, and has to cope with a wide variety of different approaches, not just the nature of the rules, but the way in which they are implemented. Understandably, that creates significant difficulties for such enterprises. It is that lack of consistency that the Government are absolutely right to try to address.

I have one fundamental difficulty with that, with which I hope that the Minister can help, although I suspect that the Government have struggled with it. That is that there is an unintended consequence of this, which affects most UK businesses. As the Bill is currently drafted, it would in effect create two regulatory environments: one for multi-site, larger businesses—the Tescos of this world—and one for the small, independent family businesses trading from a single location. Multi-site businesses will be able to select a primary authority, and in doing so, would hopefully have the intention of ensuring that they enjoy a better regulatory environment.

One single example—let us take Tesco—would be that its chief executive would, quite naturally, want to move on from the current local authority arrangements, and would identify what they regard as the most efficient local authority. It might be Wandsworth, or it might be, as its headquarters currently lie, in Hertfordshire. That is not far from my own constituency. What would happen is that the Tesco chief executive would say to the local authority chief executive, “Let us have the most efficient, streamlined, best possible arrangement that we can have.” Quite understandably, the local authority would look at that as an opportunity to set its standards, and would be very keen to oblige.

Meanwhile, the small independent retailer in one site would be stuck with its own authority. In good local authority areas, that would not necessarily really matter. However, what about those people who are stuck in Haringey, or—dare I say it?—the city of Liverpool, not because they are unpleasant areas, because they are delightful and charming areas, but because there is a concern there about the efficiency of their regulators?

Locally, it could mean that on the high street, a small independent retailer has one regulator, but Tesco enjoys a streamlined super-duper, all singing, all dancing, and efficient regime. In other words, there is one law for the big chains, and another for small family businesses.

I am characterising it in reasonably simple language, but it is important to look at the potential unintended consequence. The Minister will, quite rightly, have realised that the critical issue of the clause—as I am sure you will have spotted, Mr. Chope—is consistency. It would be quite right to say, “Mr. Prisk, the lack of consistency that you are suggesting is utter drivel, because if you are on one site only, perhaps consistency will have been achieved.” However, it may be consistency of bad regulation that that business has to suffer.

What I want to explore with the Minister is: what consideration have Government given to what this could mean, not least given the very great pressure on small businesses on our high streets, and the competition that they face from the larger supermarkets? How are small businesses meant to benefit from this measure? What, in the Government’s view, are the options available to them if they find themselves at a disadvantage? There may not be a huge disadvantage, but in competitive terms every incremental difference matters. In regulatory terms, if one small family business were at the behest of the clipboard mentality, while Tesco just up the street was enjoying a much lighter, better regulatory environment, there would an injustice that I am sure the Minister would wish to address.

Pat McFadden (Labour, Wolverhampton South East)

I should like to make a couple of points in response to the hon. Gentleman’s questions. I am sure that I detect no tone of partisanship in his citing Tesco, given the warm relationship that he enjoys with his local authority.

The current discussion takes us into an interesting area in respect of whether we can criticise any legislation for not doing a job that it is not intended to do. The principle of part 2 is to do with ensuring consistency for multi-site businesses. Let us pursue the example of Tesco, since we are on that subject. Tesco operates in most, if not every, local authority area in the country. There is a particular need for clear enforcement advice in respect of such a national, well-known chain. The shop on the corner operating in one local authority area only needs clear advice, but of a different kind, because it does not face the same issues that arise with a chain of outlets, where conflicting advice may be given between one local authority and another. I am not sure that the hon. Gentleman is comparing exactly the same situations.

The hon. Gentleman suggests that there might be something in the Bill for big business, but asks, what is in it for small business? I would not want small businesses to think that there is nothing in the Bill that would benefit small business. Under schedule 3, with its long list of enactments under the different headings dealing with trading standards, fire and safety, and so on, LBRO will be promoting better regulation across all those fields, regardless of business size. If that helps to lighten the burden of regulation, it will help businesses, large and small.

Many businesses are in between the size of Tesco and the single, family-owned corner shop. For example, a car dealership with outlets across the four boroughs of the black country is not a national outfit, like Tesco, but it might welcome the consistency of advice across three or four quite closely linked local authorities. To local government’s credit, there are existing examples of that. The hon. Gentleman mentioned Liverpool. If memory serves me correctly—I am sure that Committee members will correct me if it does not—on the trading standards front there is quite a successful partnership involving authorities in the Merseyside area, where something like that is already happening. There are benefits to small business and the national chains and to those in between with, for example, half a dozen or so outlets.

We have traded a few quotes today. The Federation of Small Businesses has welcomed, if not pressed for, the creation of LBRO. I hope that this measure benefits small businesses. However, part 2 of the Bill is not designed to do a different job from the one that I set out; it is about consistency for those business organisations or others who operate across a number of local authorities and seek the right set of relationships to ensure consistency. I am sure that we will soon discuss primary authorities, enforcement authorities and how things are to be done.

Clause 25

Pat McFadden (Labour, Wolverhampton South East)

The clause is important because it deals with the establishment of primary authorities. As I said, it is important that all businesses operating across multiple local authorities have some access to this scheme. The Hampton report highlighted two problems. First, not all local authorities are prepared to take on the role, leaving some businesses without an effective regulatory partner. The hon. Member for Hertford and Stortford talked about the importance of that. Secondly, the division of labour between local authorities is sometimes unfair, with some councils taking responsibility for a large number of partnership schemes to the advantage of local authorities elsewhere that may host none.

The clause is designed to tackle those problems by giving businesses more certainty and allowing LBRO to facilitate a fairer distribution of responsibility for hosting the primary authority partnerships. The relationship of primary authorities and enforcement authorities is at the heart of part 2 of the Bill. The clause and those that follow are particularly important in setting up that relationship.

David Drew (Labour, Stroud)

I agree that this is an important clause, but does the Minister agree that it would be better if services were delivered under one authority, particularly in the areas of trading standards and environmental health? There is a strong argument for unitary authorities.

Pat McFadden (Labour, Wolverhampton South East)

We have made relatively speedy progress this morning, Mr. Chope. I suspect, if not fear, that pausing for a discussion on which form of local authority is best may detain us for some time. In the fine city of Wolverhampton, we have a single unitary authority. In other parts of the country, we have a different system. I will resist the temptation to pronounce on which model is best. That is a debate for another day.

The clause is designed to do something a little different, which is to begin setting out in the Bill how the relationship of primary authority and enforcement authority is to run.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful for the Minister’s opening remarks on the clause. It is important and establishes the principle of primary authorities. Key to this matter is moving on from the familiar and established procedure of home authorities. If I made an unkind and unnecessary remark towards the city of Liverpool, I am more than happy to withdraw it. It is good to see that there are collaborations. I gather from the Minister that there are collaborations in the west midlands. The car dealership that he referred to, which we will now know as McFadden Motors, will clearly be able to trade across the west midlands with some confidence.

The primary authorities established by the clause lead me to the written evidence submitted by Hertfordshire county council, which I saw this morning. It raises a good and practical series of points. There is one particularly important point on the practical and resource implications of changing from the home authority to the primary authority. I am a Member of Parliament for Hertfordshire and county hall is in Hertford in my constituency. For those who are not familiar with Hertfordshire, it is already established as a home authority for Tesco, Dixons, Nissan, Renault and Orange. It has three dedicated offices working on that role.

I refer hon. Members to the first page of the document from Hertfordshire county council. It states:

“Under the current proposals in the Bill it is estimated that this resource”—

the resource in terms of homes for primary authorities—

“would need to increase by at least 100% assuming that only the largest businesses take advantage of the Bill's provisions. If smaller businesses take advantage of the primary authority provisions in the Bill, this increase could be multiplied several times. We estimate that up to twelve full time officers would be needed to service the increased needs of the thousands of businesses based in Hertfordshire under the requirements of the Bill.”

Three officers are currently required, but that figure could rise to 12. Even if only the largest of the businesses—say only six of them—currently working with the council as a home authority continue to work with it when it is a primary authority, the latter’s resource commitment will double.

The Minister and most Committee members will be aware of the long-held understanding between the Local Government Association and Her Majesty’s Government that additional duties placed on local authorities, in legislation, will be reflected in formula funding. Will that understanding be honoured? Will any duties placed on local authorities under this Bill be directly reflected in their formula funding?

Pat McFadden (Labour, Wolverhampton South East)

I am grateful to the hon. Gentleman for raising the submission given to the Committee by Hertfordshire county council. I read it with interest last night, and discussed it with Bill officials. Some were surprised by the submission, given how closely that council was involved in the Bill’s development over some months. I shall not take issue with its figures for the number of such staff currently employed, but it is very different from that understood by the Bill team.

The council’s note, however, fails to make reference to the provisions in clause 31, which allows primary authorities to recover costs incurred in the carrying out of its new tasks. The council’s central point is that there are resource implications for local authorities in exercising their functions as primary authorities, which is only right. Clause 31 takes account of that by allowing for cost recovery, the principle of which has resulted in small businesses giving a warmer welcome to the Bill than might have been the case. Without that provision, they might have been concerned that the resource implications would result in too much attention being given to the national chains and not enough to their own. I believe, therefore, that Hertfordshire council’s concerns are met by clause 31. As I said, we were quite surprised to receive such a note from a local authority that has been so heavily involved in the consultation and discussions on the development of this policy.

Clause 26

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 16, in clause 26, page 13, line 3, at end insert—

‘(c) the regulated person gives 3 months notice that it wishes to terminate the nomination’.

The central purpose of this probing amendment is to enable businesses to terminate the primary authority nomination. As Members will be aware, clause 26 deals with the nomination of primary authorities, but, under subsection (5), it also deals with revocations, which are permitted by the LBRO either where the LBRO considers an authority to be “no longer suitable” or where

“it considers it appropriate to do so for any other reason”.

The latter provision is found in subsection (5)(b). Amendment No. 16 would give a business the ability to indicate its wish to end that nomination. After all, clearly primary authorities will secede only if there is a two-way relationship. It is important for a regulated business to know that, if it no longer wishes to proceed with that relationship, it has the ability to seek a termination, but the clause does not make that clear. It would be most helpful to the businesses concerned if the Minister assured us that subsection (5)(b) will give them that ability.

Lorely Burt (Liberal Democrat, Solihull)

I have growing concerns about the clause. The problem is that the LBRO can nominate a local authority to be a primary authority without its consent. Under the clause, a democratically elected local authority will not have the right to decide on the service provision that would best suit the needs of the local population and economy. Does the Minister agree that the LBRO having the power to decide how a local authority should deliver services is an undemocratic and unnecessary centralisation of control, which runs counter to the principles of the system of local area agreements? Furthermore, surely a forced relationship between a council and a business would not be productive or effective for either party. Surely, a primary authority relationship will work only if both parties want to participate.

Pat McFadden (Labour, Wolverhampton South East)

This is an important discussion, because how such relationships will work is at the heart of part 2 of the Bill. As the hon. Member for Hertford and Stortford pointed out, the clause deals with how the establishments are to be set up and revoked. They could be ended for several reasons. For example, LBRO might consider a local authority to be no longer suitable for the task, or a business might relocate its headquarters from one local authority area to another and request that a nomination be revoked so that it could enter a new primary authority partnership. There might be a takeover of one supermarket chain by another, as has happened in the past, in which the supermarket that is taking over the other already has a relationship with a primary authority. Alternatively, a business and its primary authority might be abusing the provisions and LBRO might wish to change their partnership.

This issue was raised on Second Reading when sweetheart deals, in which relevant businesses and local authorities have cosy relationships but enforcement authorities have a problem, were discussed. There has to be a mechanism for dealing with such situations, but the amendment would not put LBRO under a duty to change the situation. The examples that I have given involve situations in which a business or a regulated person requests that a nomination be revoked and it is open to LBRO to do that. The amendment would not put LBRO under a duty to do so, but would allow it to. That is already within its power, but it raises questions about whether there are circumstances in which LBRO could refuse a request from a business to put an end to a partnership. The Bill should allow LBRO flexibility to work with a business and a local authority to put a matter right if the relationship is not working. It would not be helpful, in all cases, to have a statutory requirement on LBRO to put an end to a partnership without question. I understand what the amendment is trying to do, but I am not sure that that is the right way to do it.

Written evidence to be reported to the House

Clause 26

Pat McFadden (Labour, Wolverhampton South East)

I was coming to the conclusion of my remarks on amendment No. 16 at the end of the previous sitting. Essentially, as the hon. Member for Solihull said, those remarks deal with whether the relationship can be forced. That is at the heart of the question.

There are a number of safeguards in clause 26 regarding the primary authority relationship. It mentions, for example, that the Local Better Regulation Office may only nominate a local authority if

“the authority and the regulated person have agreed in writing”

or when

“the regulated person has requested LBRO to make a nomination under section 25(1)...and LBRO considers the authority suitable for nomination”.

We want to give LBRO powers on such matters, partly because we think that there could be unfairness if many authorities simply opt out of the responsibilities that go with primary authority status, and if that work is being done by only one or two authorities. In the vast majority of cases, the relationship will be voluntary—after all, arranging such a relationship will be preferable to forcing it—but we want to give LBRO the power.

Under the amendment, if a business can simply opt out unilaterally, the danger, from a regulatory point of view, is that it could shop around, perhaps looking for its version of the right answer to a particular regulatory question. We do not think that a situation in which the relationship is forced should be the norm, but we do think that, as a backstop, it is important that LBRO can bring two parties together, rather than allowing a continual opting out of the primary authority relationship for a business in a multi-site—

Mark Prisk (Conservative, Hertford and Stortford)

Will the Minister say, from a practical point of view, what steps a business should follow if it decides or feels that it needs to terminate or revoke the nomination of the primary authority?

Pat McFadden (Labour, Wolverhampton South East)

We spoke in this morning’s sitting about a situation in which one supermarket chain takes over another. The business could go to LBRO and say, for example, “We have been taken over by another group in another part of the country, so we think that the primary authority should no longer be local authority A, but local authority B.” That would be a perfectly rational thing to do. One would hope that LBRO would look kindly on such a situation. There are mechanisms whereby, for completely rational reasons, a business can say that it wants the primary authority to be changed. A similar circumstance could arise if a business moved its headquarters or principal centre of operations from north to south, for example. It would make sense for such a business to have a different primary authority relationship.

I am not saying that the arrangements should be frozen for ever once they are established, but there should be circumstances in which LBRO can say, “This is the relationship that we want to put together.” Under the amendment that the hon. Gentleman has proposed, the business could continually withdraw from primary authority relationships simply by giving notice, without the kind of reason that I have described. The danger is that we could have regulatory shopping around for the best deal, as it were, which I do not think would serve the Bill’s purpose.

Ann McKechin (Labour, Glasgow North)

Will the Minister confirm how the LBRO will determine the suitability of Scottish local authorities as primary local authorities, given that there is no specific requirement for the membership of the LBRO to contain anyone with a Scottish background, be that a member of the Scottish Government or a person from the Scottish local authority?

Pat McFadden (Labour, Wolverhampton South East)

By the same criteria as anywhere else. It would depend on whether the company, which operates in multiple areas, has headquarters in a particular Scottish local authority, or has its main operations in a Scottish area. It may also have operations in different parts of Scotland or across Scotland and England. The same principle would apply in all those cases. There is a clause in the Bill that sets out the territorial application on which we touched. Assuming that territorial application applies and that we are talking about functions that are reserved, then LBRO’s primary authority principle will operate in the same way in Scotland as elsewhere.

Mark Prisk (Conservative, Hertford and Stortford)

The debate has been useful because it has helped to clarify an issue that is not very clear in the Bill. Clause 26(5)(b) refers to when LBRO “considers it appropriate”. The Minister has now made it clear that a number of avenues are available to businesses to enable them to terminate any particular relationship with a primary authority. That has been helpful. In some ways, it would have been better for it to have been explicit, but with that clarification, I beg to ask leave to withdraw the amendment.

Clause 27

Pat McFadden (Labour, Wolverhampton South East)

I shall be brief. The clause defines the core role of the primary authority as giving “advice and guidance” to the business for which it is the primary authority and to other local authorities regarding how they should regulate the business. Therefore, it is a three-way relationship between the business and what we are calling enforcing authorities in the Bill. This clause allows the primary authority to be the business’s first port of call for advice on enforcement issues with national implications and allows the primary authority to make recommendations about the handling of particular issues that arise in its work to other local authorities.

Under subsection (2), a business and its primary authority may make arrangements to manage their partnership. The Bill does not prescribe what should be included in such an arrangement, but it may include, for example, a memorandum of understanding setting out the rights and obligations of each party. When a business and a primary authority choose to make arrangements, the primary authority must have regard to guidance issued by LBRO. The clause sets out the advice and guidance function of primary authorities, which will be an important part of their work.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for those initial remarks. As the Minister says, the clause sets out the advice and guidance elements of primary authorities, in particular their role to advise and guide regulated persons as well as other local authorities through the regulations set out in the schedules of the Bill. The Government’s explanatory notes shed a bit more light on the matter. They show that that would mean that a regulated person in the primary authority should make agreements “as they see fit”. That could raise the vexed question of how to strike a balance between improving regulatory practice to lower the regulatory burden on the one hand and ensuring consistency on the other. The Bill is trying to straddle that classic balance between achieving consistency and raising standards individually. What principles does the Minister think that the LBRO will follow to ensure that one business does not gain over its competitors from a less regulatory environment, and if an enforcing local authority fails to follow a primary authority’s guidance, what legal responsibility does it have to the business involved?

Pat McFadden (Labour, Wolverhampton South East)

On the issue of consistency, which is what this part of the Bill is all about, LBRO acts as an arbiter. For example, the enforcing authority might feel that the arrangements between the primary authority and the regulator—the hon. Gentleman quotes from Government guidance—are actually a bit of a sweetheart deal, as I think I mentioned this morning: that they have entered into a cosy arrangement with each other, with the effect that the enforcing authority does not believe that the regulations are being properly enforced.

Apart from the advice and guidance function of LBRO, it also has an arbiter function, and that takes us back to some of this morning’s debates about advice and direction. In those circumstances, the enforcing authority can appeal to LBRO to look at the situation and see whether the regulations are being properly enforced, or whether the primary authority relationship is not conducive to better regulation with regard to the public interest in the area that the enforcing authority represents. That arbitration role of LBRO is important. It is something that is not enforced as it might be under the current regime, which is another reason for establishing the body.

Clause 28

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 12, in clause 28, page 13, line 24, leave out from ‘is’ to ‘it’ in line 25 and insert

‘inappropriate and that compliance could be secured by an alternative enforcement action’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss the following amendments: No. 13, in clause 28, page 13, line 26, after second ‘the’, insert ‘originally proposed’.

No. 14, in clause 28, page 13, line 27, at end insert

‘and to take the alternative enforcement action mentioned above’.

No. 31, in clause 28, page 14, line 13, leave out paragraph (b).

Mark Prisk (Conservative, Hertford and Stortford)

I will discuss amendment No. 31 in a moment, as it is distinct. The first three amendments seek to return greater flexibility of power to primary authorities—something that was in the Government’s first draft of the Bill. There are three amendments to subsection (2) on page 13, and rather than deal with them individually, to aid members of the Committee I will read how the new subsection would read once amended, so that the picture can be seen in its entirety:

“If a primary authority determines within the relevant period that the proposed enforcement action is inappropriate and that compliance could be secured by alternative enforcement action, it may within that period direct the enforcing authority not to take the originally proposed action and to take the alternative enforcement action mentioned above.”

That would be the net effect of the three amendments, although I stress that they are probing amendments and seek to understand the subsection.

As currently drafted, the clause is much narrower than in the original Bill as presented to the other place. As such, it limits the primary authority to intervening by preventing one form of action by an enforcing authority. The amendments, which have the support of the British Retail Consortium, seek to re-establish a wider remit so that where better alternative actions exist, the primary authority can direct the enforcing authority to implement them. That would enable the primary authority to act more positively, and not be negative in its activities.

I fully accept that the wording that I used is not perfect—that is my error and not that of the Clerks. However, I wish to consider the practical issues and perhaps the Minister could focus particularly on why the Government decided to change the original wording. Secondly, does the Minister recognise that more flexible powers would better enable primary authorities to fulfil their role? That is the heart of the amendments.

Amendment No. 31 relates to subsection (9) on page 14. It defines the relevant period within which a primary authority must decide whether enforcement actions can or cannot proceed. Subsection (9)(a) specifies that that might be

“the period of five working days”,

which for most companies is a normal working week. It means that during that time the business is in limbo about whether it will face a sanction, fine or whatever. In business, time is money and that is particularly the case for small businesses who may be affected by such legislation. The matter should be hanging over them for as short a period as is reasonably possible.

Subsection (9)(a) is good, because five working days is perfectly reasonable and sensible. My problem is that paragraph (b) then states that “relevant period” can mean

“such longer period beginning with that day as LBRO may direct.”

Why does the Minister believe that the LBRO should need any longer than five working days? That would cause difficulties for smaller businesses. Rather than the major organisations with large legal departments, this concerns the smallest family businesses that have only two or three people who are just trying to get on with their job. They have a personal sanction and are waiting to know what will happen. Is not five days enough? I look forward to the Minister’s response.

Lorely Burt (Liberal Democrat, Solihull)

The area of greatest discomfort for me is that the clause will bestow on one local authority the power of veto over another authority’s enforcement decisions. That not only is undemocratic, but gives the primary authority de facto powers of legal interpretation that are the proper function of the courts. The amendments and the new clause that I have tabled would remove that veto and leave it to a court rather than a primary authority to decide whether enforcement action was unjustified in the light of advice given to a company by the primary authority. I should be grateful if the Minister would try to give some reassurance and a little more information on that matter.

Pat McFadden (Labour, Wolverhampton South East)

The hon. Member for Hertford and Stortford posed two questions in moving his amendment. One was why the Government had changed their position somewhat on the issue since the draft Bill was published and the other related to the relevant time, so I shall try to cover both points. He is right that there was something of a change in the position and that the amendment he proposed would take us back closer to where the process started in the original consultation. I will explain why the Government changed their view on that during the consultation. Subsection (2) is clear about what the grounds are. It states:

“If the primary authority determines within the relevant period that the proposed enforcement action is inconsistent with advice or guidance previously given...it may within that period direct the enforcing authority not to take the enforcement action.”

The test, therefore, is inconsistency with advice or guidance previously given, and that test is narrower than the one we originally proposed and the one outlined in the hon. Gentleman’s amendment, which would be whether it was inappropriate.

When we consulted on that issue before the final version of the Bill was published, a number of stakeholders and local authorities told us that they were concerned about that because it would give the primary authority a role that was more akin to a free-ranging right of review, rather than asking it to answer what is a clearer and more narrowly defined question on whether the enforcing authority had acted in a manner consistent with the advice that was given. We took those representations on board and narrowed them down somewhat. In doing so, I believe that we have, to some extent, eased the burden on primary authorities with regard to what they are required to look at in those circumstances. Some primary authorities—even very experienced ones—have a number of headquarters in their areas. We are concerned that a wide test, such as the test of inappropriateness, would leave them having to play a much more interventionist role, rather than judging enforcement action on the basis of consistency of advice.

Judy Mallaber (Labour, Amber Valley)

I can see that my hon. Friend is saying that it gives a narrower power of discretion and judgment to the primary authority. However, there could still be circumstances in which the enforcing authority felt that it had a good, specific, local reason to take different action from that in the original guidance. Will my hon. Friend tell me what the situation will be? Will there be a right of appeal to the LBRO and whose view would ultimately prevail in that circumstance?

Pat McFadden (Labour, Wolverhampton South East)

That is where LBRO’s arbitration role comes in. My hon. Friend is right to say that. If the test was the original, wider appropriateness test, rather than the consistency test that we have now written into the Bill, there would probably be many more appeals to LBRO.

I hope that helps the hon. Member for Hertford and Stortford in relation to his amendment. I understand what he is driving at, as it is pretty close to the position where the Government began on this. However, we have listened to the representations about the burden that would be put on primary authorities. As I said, significant concerns were raised by people charged with enforcement. They said that giving primary authorities such a general right to block enforcement action would be wide-ranging—much more so than the consistency test—and that it would put a substantial burden of liability on the primary authority, which would find itself required to make a thorough investigation of every aspect of a particular enforcement action.

This morning, we discussed the concerns of the hon. Gentleman’s local authority about the burdens that will potentially be imposed on it by the Bill. My fear is that, compared with the consistency test, the amendment would increase those burdens. That is why we have made the change.

Before I turn to a further point made by the hon. Gentleman, I will mention a couple of the stakeholders who have commented on this. Representatives of the professions involved, such as the Trading Standards Institute and the Chartered Institute of Environmental Health, have welcomed the change we will make in this regard. The consistency test gives the primary authority more of an objective role, which is founded on judging the action against the advice that it has given. That is why we have narrowed the power in that respect.

On the point about the extension to the normal deadline of five working days, the hon. Gentleman is right that the normal deadline would be five working days. However, subsection (9)(b) states,

“such longer period beginning with that day as LBRO may direct.”

In the conversations that we have had with local authorities, including Hertfordshire council, five working days is thought to be sufficient in the vast majority of cases and is normally enough to give the enforcing authority time to judge the consistency test, about which we are talking in relation to the clause.

The ability to extend the deadline has been included to provide some flexibility in situations where, for one reason or another, it might not be possible for the primary authority to respond in five days. For example, a particular event in the primary authority area might mean that staff are diverted on a short-term basis and that the primary authority is unable to commit resources to considering such a referral. A case might be particularly complicated and occasionally might take longer than five days. The Local Authorities Coordinators of Regulatory Services—the local authority regulation body—has commented on the Bill and has recommended that we extend the term from 28 days as a matter of course. We do not want to do that because we agree with the hon. Gentleman: time is money and we do not want unnecessary extensions. Five days should be the norm in most cases. However, we do think that the provision for some flexibility makes sense. I hope that on that basis, the hon. Gentleman will not choose to press the amendment.

Mark Prisk (Conservative, Hertford and Stortford)

The debate has been helpful. I understand that it was slightly ironic to propose what the Government were originally proposing and then to watch the Minister explain why they have changed their mind. It is very good to see—

Pat McFadden (Labour, Wolverhampton South East)

It is all part of the consultation.

Mark Prisk (Conservative, Hertford and Stortford)

The listening Government. I am sure that that is all part of the process and we just hope that it is more successful than it has been elsewhere in Government business. It is entirely right that the Minister should reflect that consultation and that is welcome.

With regard to amendment No. 31, I confess that the moment the phrase “28 days” loomed I suddenly thought that we were in another place, discussing other matters. Thankfully, I do not feel so passionately about it that I feel the need to leave the room, but the debate is important.

It was particularly helpful that the Minister made it clear that the Government’s wish and the LBRO’s wish is that five days is the norm and that there has to be a jolly good reason for going beyond that. That is an assurance that I know small businesses will want. The idea that 28 days should be the norm is nonsense; it might be convenient for the local authorities, but in the end the paying customer is the small business. Small businesses are the ones who all of us in the public sector rely on to generate the wealth to pay for our incomes and we should not forget that. Although I understand that there will be exceptional cases, as long as that is the case and as long as we recognise that five days is the normality, it would seem that we have made a gain today. On that basis, I beg to ask leave to withdraw the amendment.

Clause 29

Mark Prisk (Conservative, Hertford and Stortford)

I should like to raise some short questions, principally with regard to subsections (1) and (2). I am sure that the Minister will want to provide clarity to us. First, subsection (1) states:

“The Secretary of State shall by order with the consent of the Welsh Ministers prescribe circumstances in which section 28(1) to (4) shall not apply.”

It would be helpful if he described the circumstances in which consultation would not take place as it is not clear what that would extend to.

Secondly, subsection (2) states:

“Where a local authority other than the primary authority takes enforcement action against the regulated person in circumstances prescribed under subsection (1), the authority must inform the primary authority of the enforcement action it has taken as soon as it reasonably can.”

When informing a primary authority of enforcement action, given that people are waiting to know the sanction that may or may not be imposed on them, what would the Minister regard as unreasonable?

Thirdly, can the Minister tell us when it would be impractical to contact the primary authority? That is clearly a concern and it would be useful to know what exactly the Government have in mind.

Pat McFadden (Labour, Wolverhampton South East)

I hope I can shed some light on the hon. Gentleman’s questions. As he rightly said, clause 29 allows the Secretary of State to prescribe the circumstances in which the procedure requiring an enforcing authority to notify a primary authority of proposed enforcement action shall not apply. I shall provide some examples later, but I think that we can all probably think of examples where action needs to be taken then and there, where it may not be practical to do what is proposed, but I shall come on to that in a moment.

The primary authorities scheme is intended to provide consistency and certainty for businesses operating in a number of local authority areas, but it is also important that that should not be allowed to delay essential and routine action by local authorities where it is appropriate. Our extensive discussions with local authority enforcement officers and their representatives have demonstrated that although it is important that exemptions are made, the complexity and diversity of the underlying regulations dealt with in the Bill mean that secondary legislation is probably the most appropriate way of doing so.

The order-making power of clause 29 will allow for exemptions to be drawn up. That would include exemptions where the enforcement action was required urgently, for example to avoid a significant risk of serious harm to human health or the environment. I am sure that if we found somewhere serving unsafe food we would not want to wait five days, 28 days or whatever may be determined. Other cases might involve the financial interests of consumers—if there is a serious fraud going on, or financial interests are under threat—or where referring the case to the relevant primary authority might be wholly disproportionate.

The order may include, therefore, exemptions where delay would inhibit effective evidence-gathering or investigation of a breach, or where it would be impractical to seek the view of a primary authority when exercising powers—for example, under the Noise Act 1996. If speakers were blaring at 4 am, I do not think that we would want to wait five days. The underlying regulations are deliberately local in nature, and that could be another reason, as for example with many aspects of the Licensing Act 2003, or where the enforcing authority already has to seek approval for its proposed enforcement action from another force—that would meet the purpose of the notification requirement.

We have committed to laying an order under clause 29 as soon as possible after the Bill has come into force. I am happy to repeat that commitment to the hon. Gentleman today. I would also like to take the opportunity to clarify that the primary authorities scheme will not become operational until the exemptions have been drawn up and come into force. That is the context and content of clause 29.

Clause 30

Mark Prisk (Conservative, Hertford and Stortford)

I thought that the Minister was about to rise gracefully to his feet and I hesitated, then he hesitated. I have only one brief question.

Pat McFadden (Labour, Wolverhampton South East)

I apologise to you and the Committee for being too slow off the blocks, Mr. Chope.

The clause makes provision for a primary authority to draw up an inspection plan containing recommendations as to how other local authorities should inspect a business for which it is the primary authority. That is important. It takes us back to the point made by the hon. Member for Solihull about risk-based inspection. The clause is intended to bring about greater consistency and co-ordination of regulatory enforcement for businesses that adopt the primary authorities scheme. That is one of the prizes in the regulatory regime—there can be an agreed inspection plan, which gives local authorities and businesses some clarity about what is inspected and what is appropriate in those circumstances.

Where another authority departed from the recommendations of the inspection plan, it would be required to notify the primary authority of that before carrying out the inspection, giving its reasons. That would help to support the sharing of strategic information between authorities. It would be important for the primary authority to learn why an enforcement authority might want to do that. It also might give the primary authority a better picture of how the business is operating throughout the country.

Subsection (3) lists examples of issues that can be addressed in an inspection plan, such as paragraph (a):

“the frequency at which, or circumstances in which, inspections should be carried out”

and

“what an inspection should consist of”.

The list is not exhaustive. The Government’s expectation is that inspection plans might address a number of other issues, including those areas where a business is dedicating resource to raise compliance itself, where that is an ongoing problem to which enforcement authorities should pay particular attention.

There are constraints on the content of an inspection plan. A primary authority must consult with the business before making such a plan and it must take into account any relevant recommendations relating to the frequency of inspection when drawing up an inspection plan. Again, that is an important part of the overall regulatory regime to encourage a more co-ordinated and strategic approach. I am sure that all of us in our constituencies regularly meet businesses that are asking for that kind of consistency. Any reasonable business expects, and does not mind, that it will occasionally be inspected. I recall visiting a business in my constituency a couple of weeks ago, when the owner said, “The trouble with inspections is that they are a bit like buses, you get none for a long time and then four turn up at once. We are not sure why, we have not been inspected for years”. An inspection plan, agreed between the primary authority and the enforcing authorities, would give businesses and the enforcing authorities clarity about what was expected.

Mark Prisk (Conservative, Hertford and Stortford)

I entirely agree that inspection plans have considerable merit. They provide what most businesses seek, namely, a degree of consistency, clarity and, most important, certainty—knowledge as to what they can expect, when they can expect the inspections and how they work from the business’s point of view. As the Minister describes, the fear is of not having been inspected at all and suddenly having three gentlemen or ladies with clipboards arrive within a week. First, it is immensely intrusive, and, secondly, it puts into the back of the mind the fear that, “Hang on, am I being targeted or do the three not talk to each other so we end up with this kind of nonsense?”

The purpose of the plan is right, but how prescriptive do the Government expect the plans to be? How far should the issues be detailed? Would the plan need to include a get-out clause, or an option to cover circumstances where something changes and there has to be a departure from the plan? Could the Minister clarify how the Government anticipate that it will work?

Pat McFadden (Labour, Wolverhampton South East)

Subsection 3 of the clause refers to frequency and circumstances, and what an inspection should consist of. We have not been more prescriptive than that in the clause. The hon. Gentleman is right to say that an enforcing authority may decide that an inspection is needed even if—to continue his metaphor—the bus is not due; it would be expected to inform the primary authority, but we are not so rigid as to say that an inspection in those circumstances should be banned. In fact there may be good reasons why it has to take place; we touched on those in our debate on the previous clause. Overall, an inspection plan would help to give clarity, both to local authorities and to businesses. There may be exceptions to the plan but at least having it will give business some idea of what is expected of them and how frequently to expect inspections.

Clause 31

Pat McFadden (Labour, Wolverhampton South East)

The clause is important; it is about the power to charge—a point we touched on this morning. It states:

“The primary authority may charge the regulated person such fees as it considers to represent the costs reasonably incurred by it in the exercise of its functions under this Part”.

The provision recognises two important points. The first is that there are costs in acting as a primary authority. The primary authority is, in effect, acting as an advice broker, both to the business and to other enforcing authorities. Secondly, it helps to address the concern of some small business organisations that primary authorities might devote whatever expertise they have in regulatory enforcement to dealing solely with the concerns of multiple-site, rather than single-site businesses. In that respect, clause 31 makes provision for a primary authority to recover the costs of carrying out its functions under part 2 from the business for which it is acting as a primary authority.

The clause also provides that a primary authority may charge only for costs that it has reasonably incurred and does not, therefore, allow a primary authority to profit from its functions under part 2. Furthermore, where a primary authority chooses to charge a business, it must have regard to the relevant guidance issued by the LBRO under clause 33.

As I said, small businesses welcome the power to recover costs and can now confidently expect a local authority that takes on the primary authority role not to divert resources away from the advice and support that they look to it to provide. One might ask why businesses should pay for that service when they already pay their business rates. However, participation in the primary authorities scheme will give businesses access to a range of services over and above those available to businesses in general.

The provisions in clause 31 are important to the functioning of the primary authorities scheme and respond to some of the concerns about costs raised by Hertfordshire and other councils.

Mark Prisk (Conservative, Hertford and Stortford)

This is an important clause, not least because it goes to the heart of several of our debates.

Hertfordshire may have been considering the Bill as it was before we debated it today, but the council was clearly concerned about the due costs, which we debated before lunch. Clearly, it has been decided that those costs will now be met by business, rather than through an adjustment within local authorities, which I am sure will please the Chancellor. I can understand the reasoning behind that decision, and there is an argument that the person who benefits from a service should contribute towards it. However, that raises the point—to return to an earlier debate—that only multi-site businesses can benefit from the primary authorities scheme, which provides quite a beneficial service for them to tap into. There is therefore a regulatory distinction between the businesses that can nominate primary authorities and the single-site small businesses that cannot. It is important that we bear that in mind.

On the specific point about the power to charge, the clause says that fees must

“represent the costs reasonably incurred”

by the authority, and that phraseology is perfectly acceptable. However, although the arrangements seem fair on the face of it, there are concerns, and I want to tease out a further response from the Minister.

The purpose of the Bill is to improve regulatory standards for businesses, principally by enabling them to nominate a primary authority as their sole local regulator. As the Minister said—almost in anticipation of my point—some businesses will say, “Hang on a moment. We’re already paying corporation tax and a range of other things.” They are paying their national non-domestic rates, or business rates as they are better known, so what are they paying for in addition? The CBI is not alone when it says:

“We do not see a compelling argument for why business should apply additional sums or why there should be a net increase in costs.”

The CBI’s essential point, which is not unreasonable, is that although it wants better regulation, why must business pay for what the Government should deliver anyway? That is a perfectly good point, and I would be interested to hear the Minister’s response.

My final point, which is just as important, is who will decide that a primary authority is making reasonable charges—to use the language of the clause? Will the LBRO be able to intervene or will it be the Secretary of State?

Pat McFadden (Labour, Wolverhampton South East)

The hon. Gentleman has given me the opportunity to refer to the impact assessment for the Bill, which details some of the costs and benefits. Referring to it will perhaps help to answer his question about what the benefit in all these things will be.

As ever with impact assessments, we are talking about an assessment. The purpose of the Bill is to review all the issues in three years, but the assessment of benefits to business from, for example, consistency of advice could be anything from £24 million to £48 million. Consistency of risk assessment could be anything between £3 million and £5.8 million and savings from more effective priority setting provision of guidance could be up to £32 million.

So there are substantial potential cost benefits to businesses from a regime under which the advice is more consistent and they are more certain that they can, for example, introduce more product lines, knowing how that might be judged in different parts of the country. Although cost recovery has been built in, to ensure that the primary authority principle does not become too much of a burden to the local authorities that take it on, there is still substantial benefit—in fact, far greater benefit—for businesses in having this regime than in not having it.

The hon. Gentleman asked who would determine the charges and who would judge whether they were reasonable. I fear that, on that question, I may have to come back to him or write to him.

Clause 32

Mark Prisk (Conservative, Hertford and Stortford)

The clause is an interesting addendum to what we have been talking about. Subsection (1) states:

“LBRO may do anything it considers appropriate for the purpose of supporting the primary authority”.

That is quite a wide statement and, while we do not want to be nonsensical, given that it is in the Bill and we are dealing with an unaccountable, non-departmental public body, it is questionable whether it should be able to do anything that it regards as appropriate. There is no requirement, for example, for the LBRO to act in a proportionate fashion. The clause does not say that it should act in an open and transparent manner. It would therefore help if the Minister clarified matters.

I am worried because it feels as though the clause has been inserted quickly and without due consideration. That feeling is reinforced by the fact that, having given us large, sweeping potential power under subsection (1), the clause suddenly realises that it may have gone a bit far, and suddenly we get subsection (2), which says, “Oh, and that includes making grants”. There is the impression that the clause has not entirely been thought through. I hope that the hon. Gentleman can reassure me about that.

Fine, I accept that the LBRO has the power to make grants. On what basis? For how much? Where will it work? What will the grants pay for? The clause is not well drafted. It gives a wide, sweeping range of examples and then someone has tacked in grants at the back of it as an afterthought. It does not feel like a coherent thought. I should be interested to know what the Minister believes would not be appropriate, so that we can understand how far the LBRO can extend itself.

Pat McFadden (Labour, Wolverhampton South East)

This is an enabling clause. We talked this morning about LBRO’s budget, which has been set at about £4.5 million a year. That is a relatively modest amount with which to carry out its functions. It would enable it possibly to give some support to local authorities in respect of functions that it asks them to do, which is why the clause includes making grants to local authorities. The Bill does not prescribe the circumstances in which LBRO may do that and it will ultimately be for its board to decide whether it wishes to exercise the functions. It is sensible to allow LBRO such a power to ensure that it is able to carry them out. It is sensible flexibility to provide the support that, as an independent body, it should provide.

There are constraints on LBRO’s expenditure within the normal Treasury rules. We talked this morning about the presentation of accounts to Parliament. That discussion was about time limits, but the normal Treasury rules would apply to expenditure. We think that it is sensible to have some flexibility to support local authorities in the work that we are asking them to do in this part of the Bill.

Clause 34

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 33, in clause 34, page 16, line 16, leave out from ‘Part’ to end of line 17 and insert

‘may not be made unless a draft of the instrument had been laid before, and approved by resolution of, each House of Parliament.’.

I was confused by the numbers. I heard 33 and assumed that it was the amendment. My apologies for that, Mr. Chope.

As hon. Members will see, clause 34 refers to various orders that Ministers may present to complete this legislation through this part of the Bill. The amendment seeks to ensure that they require the positive resolution of both Houses before becoming law. Part 2, which we are considering at the moment, introduces primary authorities which will affect most employers and every single local authority in our constituencies. Primary authorities will mean that many businesses in our constituencies will no longer be subject to the authority of our local authorities, and that is something that we need to consider. It is a radical departure from current practice. It is important that we, as hon. Members of this House, ensure that the workings of the new system are subject to proper scrutiny. Given that the LBRO will not be directly accountable to the House, is it not important that we ensure that the system is accountable to us? Rather than pursuing the negative resolution, I think that it is important to ensure that the system is covered by the positive resolution. I look forward to hearing the Minister’s response.

Lorely Burt (Liberal Democrat, Solihull)

I support the hon. Gentleman. It is extremely important that with legislation of this nature, we should have the positive resolution. I hope that the Minister will give some thought to implementing this one important amendment.

Pat McFadden (Labour, Wolverhampton South East)

There are two amendments that one can guarantee will be moved during the passage of any Bill. One is the amendment that turns the word “may” into “shall” and the other will raise negative and affirmative order-making powers. Therefore, such an amendment was always going to come up.

Clause 34 is specifically about the order-making powers under part 2 of the Bill. There are various other order-making powers that are subject to affirmative resolution procedures, which we will discuss in part 3. This is about the order-making powers in part 2. There are four specific order-making powers in this part. The first of these, under clause 24, allows for the legislative scope of the primary authority scheme to be defined for Scotland and Northern Ireland. The next two orders in clauses 28 and 29 allow for exclusions and exemptions to the primary authority scheme to be specified. We discussed those in the debate on clause 29.

Finally, schedule 4 allows for detailed provision to be made for procedures in which matters raised by the primary authority scheme go to arbitration. The Government made it clear in their submission to the Delegated Powers and Regulatory Reform Committee that we believed these to be essentially technical matters, and that the negative resolution procedure was appropriate in those circumstances. None of the powers can be used in a way that would either extend the scope of the Bill or make other amendments to primary legislation—there is no sense of a Henry VIII power. We therefore believe that the negative resolution procedure is appropriate.

Two issues were raised in the debate on this in the other place. The Delegated Powers and Regulatory Reform Committee did not comment on the negative resolution procedure. However, that was on the condition that the orders establishing Northern Ireland and Scotland’s scope should not specify functions that did not already appear in schedule 3, which we discussed this morning. This is still about those headings set out in the enactments in schedule 3 about trading standards, fire safety and so on. It does not go broader than that.

There was also a view expressed in the other place that it should be made clear that the exemption orders should be required to exclude cases in which serious harm might result from the delay that the primary authority provisions could create. We are happy to make both of those changes, which are reflected in the Bill. We will shortly be consulting on the orders and will focus the consultation on enforcement specialists in local authorities and businesses, because they are likely to be highly technical, as I have said.

There is always a debate about whether orders should be subject to the negative or affirmative procedures. We certainly do not take the blanket view that the negative procedure should be used throughout the Bill. As I have said, order-making powers under part 3 will be subject to the affirmative resolution procedure, but we feel that the negative resolution procedure should suffice in relation to the orders covering the issues in this part of the Bill—particularly because the matter has been discussed in the other place and considered by the Delegated Powers and Regulatory Reform Committee.

Mark Prisk (Conservative, Hertford and Stortford)

This has been a helpful debate. I accept that a number of the orders principally relate to technical matters. As the Minister highlighted, the orders in parts 1 and 3 are subject to the positive resolution. However, that is not the case here. I considered the issue with some care and looked at the matter in terms of schedule 4. Enforcement action is quite an extensive part of the Bill in relation to the way it reaches the operations of the LBRO. That is particularly the case in those areas where the actions of the LBRO will impinge upon the businesses concerned—the regulated person, as it were.

My problem is that the LBRO itself is not accountable to us. Therefore it is important that we strengthen our ability to scrutinise the Government’s actions wherever else we can. Although I accept that, for the most part, the principal purpose of the orders for this part is technical, the enforcement action is nevertheless important. If I might refer to the metaphor used by the Minister, enforcement action will be the teeth that are often seen and, indeed, felt by the regulated persons. It is therefore important that we have the opportunity—no more than that—to debate these matters in an appropriate fashion. Although I understand the assurances of the Minister and do not always think it is appropriate to pursue the positive resolution on technical matters, on this occasion it is. I therefore seek to press the amendment to a Division.

Clause 36

Pat McFadden (Labour, Wolverhampton South East)

If you will permit me, Mr. Chope, I will go slightly wider than may be appropriate and pause for a moment to talk about part 3. This takes us into the second significant area identified by Hampton in his report. The first area was inconsistency, and we talked about that a lot in parts 1 and 2 regarding the establishment of LBRO and the primary authority principle that we were debating.

We now turn to Hampton’s other significant criticism of the regulatory regime—inflexibility. This part of the Bill begins to address that issue, and gives greater flexibility to regulators in terms of the sanctions that they can impose. Some of those sanctions are monetary, some involve corrective actions or instructions for corrective measures to be taken, but they all address the issue of inflexibility and the disproportionate nature of having a one-club policy to enforcement—that of criminal prosecution.

Hampton’s work was built on by Professor Richard Macrory who, if memory serves me, published his report in November 2006. Macrory recommended a number of the different sanctions outlined in part 3, which acknowledges and introduces different powers, including fixed penalties, available monetary penalties, stop notices and so on. We will help ensure that rogue traders—or, as it says in my speaking note, “rouge traders”—will not continue to receive an unfair advantage by failing to adhere to the law, and we will increase confidence further in the regulatory regime.

The proposals have been welcomed by bodies including the Engineering Employers Federation, the Federation of Small Businesses, local authority enforcers and the Institute of Directors. There is widespread support for more flexibility in the system and clause 36 specifically allows a Minister of the Crown or a Welsh Minister to make an order providing for those new civil sanctioning powers as an alternative to criminal prosecution.

As I have said, the sanctions will provide regulators with more proportionate, flexible and effective ways of targeting regulatory non-compliance. Before making an order, the Minister must be satisfied that the regulator will exercise such powers in a manner that is in line with the principles of good regulation—we talked about that this morning—in a way that is transparent, accountable, proportional, consistent and targeted and used only in cases where action is needed. The Minister must seek the approval of the Panel for Regulatory Accountability, whose terms of reference include ensuring that the burden of regulation on business is kept to a minimum. That process is set out on pages 28 and 29 of a guide to the Bill published by my Department.

The Bill also requires the Minister to consult before making an order, and subjects it to affirmative resolution procedure. That means that the relevant parliamentary processes will apply to that order. Part 3 is an important part of the Bill. It addresses the issue of inconsistency, it gives greater flexibility to the regulators and it ensures that we will tackle these rouge traders.

Mark Prisk (Conservative, Hertford and Stortford)

I welcome some of the remarks that the Minister has made. He has identified that this clause seeks to provide powers to make orders providing for civil sanctions, but it then proceeds to do so right across the whole of the part. To follow his remarks, which edge slightly beyond clause 36, without testing your patience, Mr. Chope—I am sure that you will guide me should I stray too far—he is right to say that this part of the Bill, which provides many of the order-making powers, introduces a wide range of sanctions. We have fixed monetary penalties, discretionary stop notices and other enforcement actions. Those are provided not just for a single regulator, but for 26 different regulators, as well as all the local committees, so probably 30 bodies. Those include the Financial Services Authority, the Charity Commission, the Health and Safety Executive, the Football Licensing Authority and even the Human Fertilisation and Embryology Authority—so a really wide range of regulatory bodies.

Legally, the sanctions according to schedule 6, which I am sure we will come to in due course, apply to no fewer than 142 separate laws. Almost every aspect of our constituents’ lives will be covered by this: from housing to jobs, from animal welfare to protecting our children, from disability discrimination to Sunday trading. All of those statutes are listed in the Bill and are affected by the new range of sanctions that we are considering in the clause.

Most notably, the sanctions, which are often fines, will be imposed without recourse to the courts. The Opposition do not oppose civil penalties as a matter of principle, but we believe they are most appropriate for minor offences such as parking or speeding. The danger is that we may end up with the regulators handing out the equivalent of parking fines, which may prove rather attractive to them. That is bad for business and it undermines what we have debated so far—the concept of a risk-based approach to regulation as set out in parts 1 and 2.

Many business organisations are concerned. The Minister said that there was wide support. Let me joust briefly with two or three proponents on this side of the argument; he has mentioned two or three on his side. The British Retail Consortium is very concerned. It regards the section as “unacceptable”. The Forum of Private Business regards it as a deal breaker. The CBI says that

“business is still concerned that introducing more administrative fines will foster a ‘parking ticket’ mentality amongst inspectors, which will fundamentally change the existing relationship between inspectors and businesses”.

Let us be candid with one another: there are mixed views rather than a body of opinion that is wholly on one side or the other.

Lorely Burt (Liberal Democrat, Solihull)

While the hon. Gentleman is talking about a parking ticket mentality among inspectors, does he agree that a parking ticket of £70 might be nothing to someone who has a good income—such as a Member of Parliament, dare I say it—but to a pensioner a parking ticket is a huge imposition? I certainly could not use the example of a Member of Parliament as regards changing behaviour, but a lot of people can disregard parking tickets and treat them as part of doing business, whereas for other people they make a big difference.

Christopher Chope (Conservative, Christchurch)

That was a long intervention. This Bill is not about parking tickets.

Mark Prisk (Conservative, Hertford and Stortford)

My allusion—

Lorely Burt (Liberal Democrat, Solihull)

A metaphor.

Mark Prisk (Conservative, Hertford and Stortford)

It was a metaphor rather than an allusion. The metaphor was to illustrate not that we were talking about real parking tickets, but that we are talking about the danger that simply handing out fines or sanctions is not the way in which compliance is achieved. Obviously, the principles of Hampton and Macrory, upon which the Bill is based, are anxious that we do not go down that path. It is that mentality that the hon. Lady was referring to.

The concern about this section of the Bill and about the clause, which introduces many of the related powers, is not limited to business. There were serious and extensive debates in the other place, with contributions from members of all the political parties. The reason is that, while providing for what the Minister described as a simpler process of enforcement for the regulator, the provisions remove the right to be heard in an ordinary court of law. The orders in the clause, which would relate to fixed monthly penalties and discretionary monthly penalties elsewhere in part 3 of the Bill, mean that instead of any one of those 27 or so regulators only being able to investigate a possible breach, they would also be the people that would decide on a person’s guilt and who would hand out the sanction. They would have the dual role of investigator and prosecutor, and judge and jury, all in one body.

On Second Reading and in earlier debates, Ministers have been keen to say, “Ah, but there is an independent tribunal process”—an appeal process is available. There is, but it is just that, an appeal process. In other words, that process only happens after the sanction or the fine has been handed out. To use the criminal law equivalent, that only happens after the accused has been found guilty. There is, therefore, no opportunity for an innocent person to defend themselves until appeal. That is the crux of the concern.

The orders set out in the clause, which relate to the rest of part 3, are important. If the clause related to just one regulator or one piece of legislation, it might not be regarded as such a significant incursion. However, we are talking about over 27 different regulators, with 142 different pieces of legislation. It is therefore a huge shift in the law. Whatever the Minister’s original intentions, the clause has the potential to result in a significant reduction in our civil liberties. It is worth remembering that a regulated person—someone who could receive such a sanction or fine—is not just a business, but a person. Hon. Members may wish to reflect on that and what impact that might have on, say, a shop worker, who might suddenly find that those 27 regulators and 142 different pieces of legislation might well relate to them. That is worth bearing in mind.

My party and I have serious reservations about this part of the Bill. We understand the benefits of, as the Minister rightly says, not simply relying on one, crude, one-size-fits-all criminal approach and we understand that there is a good argument for the civil procedure, but our worry is about a wide range of powers for a wide range of regulators. Therefore, as we go through this and subsequent clauses, I hope that the Minister will be able to demonstrate why the approach is both right in principle and appropriate in practice.

Pat McFadden (Labour, Wolverhampton South East)

I shall try to answer some of the specific points without going into a Second Reading debate on part 3 of the Bill.

The hon. Gentleman raised two points, the first being about a parking ticket mentality and whether that would be encouraged—although I have said that we are not talking about parking tickets as such. There are safeguards against that developing too easily. Regulators will have to be satisfied to the criminal standard of proof—beyond reasonable doubt—that a person has committed an offence before a regulator can impose a fixed monetary penalty. The person will be able to make representations to the regulator before the sanction can be imposed. The hon. Gentleman was somewhat dismissive of the right to appeal against the sanctions to an independent tribunal, but it is there, in the Bill, and is an important safeguard against an abuse of the powers by a regulator. Also, regulators will not directly benefit from penalties, as any moneys gathered as a result will be paid into the consolidated funds. We are not setting up a money-making scheme for regulators.

The hon. Gentleman talked about businesses being concerned about judge, jury and so on all being one. In the end, we must make a judgment about whether we want to have a regime that includes such sanctions in addition to the traditional route of criminal prosecution. Criminal prosecution has been used until now—or often not used, because of various issues. It can be a disproportionate response to many instances of non-compliance, and we believe that regulators need access to a range of more flexible sanctions.

As Professor Macrory said, civil sanctions are an established part of the enforcement landscape. A number of regulators already have the power to impose them. It is not a new constitutional departure. It will give the regulators listed under the schedules to which he referred the capacity to use the sanctions as they do not use them at the moment, but the principle of them is not new. The powers will be conferred on regulators only if the Minister is satisfied that they will act in accordance with better regulation principles. We have talked a lot about them today when using the powers, so I shall not repeat that now.

Businesses will have an opportunity to make their case against the imposition of the sanction. They can make representations and objections, and have the right of appeal to an independent tribunal. We will argue the case further in respect of the individual amendments that we shall discuss, but we must make a judgment about whether we shall implement Professor Macrory’s recommendations and vary the mix of sanctions available under the regulatory regime. We have decided to do so, and that is what this part of the Bill does.

Clause 37

Pat McFadden (Labour, Wolverhampton South East)

With your permission, Mr. Chope, perhaps my comments can refer to clause 37 and touch on clause 38, as both clauses are definitional.

Christopher Chope (Conservative, Christchurch)

For people to follow the debate, it is much easier to deal with the Bill clause by clause, which is what we said at the beginning of our proceedings that we shall do.

Pat McFadden (Labour, Wolverhampton South East)

I take your guidance, Mr. Chope.

Clause 37 defines the terms “regulator” and “designated regulator”. The regulator is a person specified under schedule 5. That lists a number of national regulators to which the powers will refer, many of which are familiar to members of the Committee. Subsection (3) makes it clear what is not included, such as the Crown Prosecution Service, the police and so on because those organisations retain a role in respect of criminal prosecutions that are an alternative to the sanction regimes that we are discussing now. The clause defines the regulators to which the powers would apply.

Clause 38

Pat McFadden (Labour, Wolverhampton South East)

The clause describes the relevant offences that we are talking about in respect of a designated regulator. The Bill confers powers on the regulators set out under schedule 5 to have access to the new sanctions for relevant offences under schedule 6, which is why the two parts come together to define both the regulators and the offences to which we are referring.

Clause 39

Pat McFadden (Labour, Wolverhampton South East)

The clause sets out the first of what could be called a suite of powers and sanctions and is specifically about fixed monetary penalties. Fixed monetary penalties will provide regulators with an effective tool, enabling them to deal quickly with low-level examples of non-compliance, rather than pursuing a costly criminal prosecution. Perhaps here more than anywhere, we see the stark contrast between what might be done under the new regime and the policy available under the current one.

Fixed monetary penalties are aimed at factually simple cases of non-compliance, which may or may not involve culpable conduct. For example, they could be used for strict liability offences, where it is not necessary to show intention to commit the offence, but they should benefit both regulators and business. They should also help to address the compliance deficit identified by Professor Macrory. That is important—one of the points that Professor Macrory made in his report was that not only was the system inflexible, but by having only one main tool to ensure compliance, there was actually a compliance deficit. Low-level non-compliance was either not being prosecuted or, in some high-level non-compliance cases, it was resulting in a fine that did not match the crime involved. It was not only a case of inflexibility; it was about not producing the desired results on compliance.

Judy Mallaber (Labour, Amber Valley)

Can my hon. Friend assist me by explaining what kind of offences he is talking about? In the company where I used to work, I remember that our administrator was always hugely affected by the advertisement from Companies House which stated that if accounts and orders about who was on the management committee were not returned on time, there would be a £2,000 fine. No one was sent to jail, but it was remarkable having that advertisement there—knowing that there might be a charge of £2,000 was certainly an incentive to get it done. Is that the sort of example that the Minister is talking about?

Pat McFadden (Labour, Wolverhampton South East)

It is a very good example. The previous Government introduced such penalties and civil sanctions for late filing, exercised by Companies House. That came up on Second Reading and, if I am right, rates of compliance following the introduction of those penalties went up. In 1991, the compliance rate was 86 per cent. In 1992 it immediately increased to 92 per cent., and it continued to increase to a level of 96 per cent. It shows that the previous Government were correct to introduce civil penalties in those cases. My hon. Friend is right that it is a good example, which I believe can be built on in some of the areas that we are talking about.

Turning to the clause, subsection (2) requires that regulators may only impose a fixed monetary penalty when

“satisfied beyond reasonable doubt”—

that is an important point referring to the criminal standard of proof—

“that the person has committed the relevant offence.”

Subsection (3) states that the amount of the penalty will be specified by the order made by the Minister. For example, the level of the fixed monetary penalty could differ according to whether the person liable is an individual or a body corporate. Subsection (4) caps the level of fixed monetary penalty at the maximum fine that would have been available for that offence if it had been tried summarily in the magistrates court. That is usually £5,000. There are other safeguards in clauses 40 and 41 for persons upon whom the fixed monetary penalties are imposed.

The clause sets out the basic regime for fixed monetary penalties. It is one of a number of sanctions that Professor Macrory recommended. We believe that, if enacted, it will be an important addition to what regulators can do to ensure compliance. It is also, importantly, an addition with safeguards built in for those who are subject to these procedures.

Mark Prisk (Conservative, Hertford and Stortford)

I welcome the Minister’s remarks. I confess that for a moment, when he said the previous Government, I was not sure whether he meant that led by Mr. Blair or the previous Conservative Government, but I think that by the look on his face he meant the Conservative Government. I am happy to confirm that he concurs.

There is a strong role for this kind of penalty. The Minister is absolutely right to say that built into the clause, thankfully, are some sensible safeguards. In subsection (2) we have the important principle, “beyond reasonable doubt”. Although hon. Members will realise that that is usually a criminal matter, it sets the bar high. The other point is that subsection (4), as he rightly said, puts into place the cap, which is also an important principle.

In summary, there are problems with the related system, but the principle of these penalties can and does work, as the hon. Member for Amber Valley referred to in her own example. And they do, the evidence suggests, help drive the compliance rates up in a reasonable way. So the principle of fixed monetary penalties has some merit. The two particular limits or restraints give me confidence and therefore the clause is to be welcomed in principle.

Lorely Burt (Liberal Democrat, Solihull)

I agree with everyone who has spoken on this issue. It is a good principle to have penalties. We have had a lot of discussions about metaphorical parking tickets. I just want to make one point about fixed penalties. It is important that the penalty is appropriate, just like in “The Mikado”: let the punishment fit the crime. We should be wary of developing the mentality whereby one fixed penalty for one small company might be just as appropriate as a fixed penalty for a larger company. It is important to bear that in mind.

I draw the Minister’s attention to subsection (4)(b), that the relevant offence is

“punishable on summary conviction by a fine (whether or not it is also punishable by a term of imprisonment)”.

He referred earlier to the appeals system being through a tribunal. Does he not think that if we are talking about penalties that have the potential for someone to go to prison, we should have an appeals system that, if the company so wishes, goes through the courts and not through a tribunal?

Pat McFadden (Labour, Wolverhampton South East)

To turn to what the hon. Lady has just said, the company can appeal beyond the tribunal if it wishes to continue the appeal, but the appeal is to the tribunal.

On the level of fines, those are related to the offence, which is why we get the limit that we do. Subsection (4) sets out that the limit applies where the relevant offence is triable summarily and punishable on summary conviction by a fine. These sanctions are an alternative to prosecution; they are not the same as prosecution. Perhaps that might set out the difference between a fine and criminal prosecution as the hon. Lady outlines. The principle behind this is that the penalty should fit the crime involved. One of the problems that Professor Macrory identified was that only having criminal prosecutions as a sanction for some of these lower-level offences did not actually result in the compliance that we want to see. That is why a regime more akin to what my hon. Friend the Member for Amber Valley set out with regard to Companies House is something that we want to add to the regulators’ options in such a situation.

The level of fixed monetary penalty is related to the offence. The amount that we specified is in the order, and the regulator will simply file the appropriate amount based on the characteristics of the offence and the offender. In that sense, the punishment shall fit the crime. Regulators can apply that important new option to the lower-level but important offences that our constituents expect to see punished, but that sometimes go unpunished under the current regime because the only tool available is prosecution.

Clause 40

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 34, in clause 40, page 18, line 15, after ‘regulator’, insert

‘or an independent person appointed by the LBRO’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss the following amendments:

No. 35, in clause 40, page 18, line 17, after ‘regulator’, insert

‘or an independent person appointed by the LBRO’.

No. 36, in clause 40, page 18, line 20, after ‘regulator’, insert

‘or an independent person appointed by the LBRO’.

No. 37, in clause 43, page 20, line 23, after ‘regulator’, insert

‘or an independent person appointed by the LBRO’.

No. 38, in clause 43, page 20, line 26, after ‘regulator’, insert

‘or an independent person appointed by the LBRO’.

No. 39, in clause 43, page 20, line 30, after ‘regulator’, insert

‘or an independent person appointed by the LBRO’.

No. 40, in clause 43, page 20, line 31, after ‘regulator’, insert

‘or an independent person appointed by the LBRO’.

No. 47, in clause 40, page 19, line 9, at end add—

‘(7) In this Act “an independent person appointed by the LBRO” means a person who is not, and has not been, an employee of the LBRO company or a Crown servant and has, in the view of the LBRO, relevant qualifications and experience.’.

Mark Prisk (Conservative, Hertford and Stortford)

I spoke earlier of the potential injustice of a regulator both issuing a notice of intent to find somebody and then being the recipient of objections to that decision. Amendments Nos. 34 and 35 seek to correct that injustice by providing the option of having an independent person hear those objections. Specifically, the amendments would allow the LBRO to appoint that person, but they must be independent of the regulator concerned and they must have the relevant qualifications and experience. Although I think that parts of the procedure have merits, other parts have problems and the amendments will help by giving the accused—if we can use that phrase in this context—the sense that they have an option to seek some form of independent perspective on the matter rather than simply being able to turn back only to the regulator who is trying to fine them in the first place. I hope that the Minister will consider the matter with care.

I imagine that I address amendment No. 41 a little later on, Mr. Chope.

Christopher Chope (Conservative, Christchurch)

Yes.

Pat McFadden (Labour, Wolverhampton South East)

The hon. Gentleman’s amendment proposes the alternative that an independent person be appointed by the LBRO. Does he, therefore, see the LBRO appointing someone to operate, say, in the Environment Agency as a judge of whether a client of the Environment Agency—if we may use that phrase rather than the accused—has broken the law? How would the LBRO be able to ensure that level of specific expertise in the Environment Agency’s remit?

Mark Prisk (Conservative, Hertford and Stortford)

The intervention is helpful because it gets to the heart of whether the person involved has both ability and independence from the original representation. My reading of clause 40 would be that it would be quite appropriate for an independent person appointed by the LBRO to be able to make reasonable judgment as to whether the representations and objections made were appropriate. Therefore, it would be right for the LBRO to appoint someone who has the capability to do that. That is why the amendments do not simply say that we should appoint an independent person, but would give the system the opportunity to ensure that that person is appropriate and qualified. I think the amendments allow for that, but I am happy to debate it in due course. We will come to amendment No. 41 in a moment, but that is how I believe the proposal would work.

We want to ensure that the process is seen to be fair and reasonable. There is nothing worse than a system that is generally appropriate being let down by the perception of the client—to use the Minister’s word rather than the word accused—that they are facing a regulator who has already determined that they should be fined and that objecting will therefore have no purpose.

My concern is the small business that looks at this and thinks, “Hang on a moment, I’ve just been served this notice. Where do I turn to object? It’s the very people who will serve the notice back, so I’m just going to pay the fine and get on with my life because I’m not going to get a fair hearing.” That is my concern.

Pat McFadden (Labour, Wolverhampton South East)

The amendments and clause 40 are important because the clause sets out in detail how the fixed monetary penalties that we were discussing will be applied. There is a great deal of detail in the clause—for example, the issuing of a notice of intent under subsection (2)(a). A person may make written representations to the regulator in relation to that and they may ultimately appeal against the final decision, as we have discussed.

The amendments would intervene in the area of a notice of intent before a sanction has been imposed—that is their focus. We already know that there will be an appeal to an independent tribunal when a sanction is imposed. The amendments would add a second appeal earlier in the process when a notice of intent has been issued. They cover similar territory to the amendments discussed at length in the other place, but they are slightly different. I am still not entirely clear about who the independent person referred to in the amendment might be. My broader concern is that if the amendments were accepted, further provision would need to be made for that in the Bill. Details would have to be given about the powers of the person and the procedure for considering representations and so on.

Let us remember where we started: the recommendations from Professor Macrory that there should be greater simplicity and speed, and that there should be a greater variety of options available to regulators to ensure compliance. My worry is that the amendments will make the system over-complex by giving us two different appeal processes—one where a notice of intent is issued and one where a sanction is imposed, as already in the Bill.

The Bill provides a right of appeal to an independent and impartial tribunal on the final decision, as I have said. An appeal would be able to consider matters such as whether the regulator had unreasonably dismissed the objections referred to in the clause under subsection (2)(c)—objections raised to the sanction after the notice of intent.

The issue is whether we need two rights to have the case heard by two different persons, both before and after a sanction is imposed. The amendment would add a further level of bureaucracy and additional resources would be needed to set up and maintain a body that would hear all the representations. The process of imposing a sanction would be made much more lengthy and cumbersome. The amendment might actually take us back to the problem we are trying to resolve, which is how to give greater flexibility to regulators and have a variety of options in relation to the kind of offences we are talking about.

During the debates in the other place, my noble Friend Baroness Vadera addressed similar issues on similar amendments. She agreed that there was a need for high quality decision making by regulators, and we made changes to the guidance to the Bill to strengthen that. The guidance states that

“the regulator should have arrangements in place to review or monitor individual decisions. This will ensure that there is confidence in the regulatory system”.

We want to ensure that there is some quality in the decisions, but it is important to remember that there is a right of appeal against the final decision. The question before us is whether we need two rights of appeal in the process. I hope the Committee agrees that the right of appeal to an independent tribunal covers the issue of one regulator being judge and jury together, so we would not need the additional right of appeal at the earlier stage, around the notice of intent.

Mark Prisk (Conservative, Hertford and Stortford)

The debate has been useful. I fully recognise that there are weaknesses in the amendments, but the central issue is that all that is available to someone who has a sanction placed against them at the moment is an appeal to disprove their guilt—in other words, we have an appeal process after the event. The purpose behind the amendments was to find out how we could establish a means by which a person who has been accused is able to correct something or to challenge the process with someone who is not making the notice in the first place. The amendment is not necessarily about its own merits, but about highlighting a weakness in the existing system. Of course, if we are to have a civil procedure, it needs to be reasonably unbureaucratic and reasonably efficient. If it is to have the confidence of the community that it is trying to police, there needs to be confidence in an element of fairness. I am not confident that the procedure has that appropriate balance.

In a moment I will seek to withdraw the amendments, Mr. Chope, but I do so on that basis, which I hope the Minister will consider too. I will continue to see if there is a way through. Again I highlight the fact that we are talking about a regulated person, who may be a sole trader or an individual, who would look at the system, feel intimidated about going back to a regulator and therefore feel that they should just pay the fine and get on with it. I want to make sure that we have done everything that we possibly can to get the right balance between efficiency and fairness. I am not sure that it has been achieved so far—indeed, I am reasonably confident that it has not. I am not sure that the balance is appropriate. I have not found the magic answer, but the purpose of my amendments was to see whether there was a degree of reason. I hope that the Minister can indicate from a sedentary position that the Government are open to such suggestions.

Pat McFadden (Labour, Wolverhampton South East)

Always reasonable.

Mark Prisk (Conservative, Hertford and Stortford)

Always reasonable, always open. I am pleased that the Minister is happy to say that from a sedentary position. It is important that we can find some way forward, to make sure that there is confidence in the system. The danger, I suspect, is that there will not be, as currently constituted. On that basis, I beg to ask leave to withdraw the amendment.

Lorely Burt (Liberal Democrat, Solihull)

I beg to move amendment No. 53, in clause 40, page 18, line 16, at end insert

‘may require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss the following amendments: No. 54, in clause 43, page 20, line 24, at end insert

‘and may require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.

No. 55, in clause 47, page 23, line 24, at end insert

‘and may by notice require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.

Lorely Burt (Liberal Democrat, Solihull)

The amendments all have the same purpose. The provisions would enable the business to opt for court action, if preferred, even though it could face the prospect of a criminal conviction as a result, thereby ensuring that the option was available at the request not only of the regulator but also of the company. Businesses should not have to face the risk of unsubstantiated damage to their reputations until and unless they have been proved guilty. For many businesses, the risk to loss of reputation is worse than the cost of the appeal. Consequently, many businesses would take the sanctioning decision to appeal, and they should have the option of taking the decision through a criminal court, if they so wish.

Pat McFadden (Labour, Wolverhampton South East)

In a sense, the amendments are not too dissimilar from those that we discussed previously. They are coming at the issue from a slightly different angle, but I suspect that they are motivated by a similar concern. The hon. Lady said that the client—or the accused, whatever phrase we use—should have the choice, and the amendments would apply the choice to fixed monetary penalties, discretionary requirements or stop notices.

The new sanctions under the clause and following clauses are an alternative to criminal prosecution. They will be imposed only when a regulator is, as I have said, satisfied beyond reasonable doubt with the criminal standard of proof that a criminal offence has been committed. The regulator will have undergone a thorough and rigorous investigation and, at the end of the process, will have determined that a person is liable for the offence. The important question to be answered is whether we think that, after that process, it should be for the person, the business concerned or the regulator to decide what route the sanction takes.

Lorely Burt (Liberal Democrat, Solihull)

I am interested in the route that the Minister is taking. He seems to be implying that, if a case is considered strong, the judge and jury have already gone out, come back and decided that the company is guilty. Given what he has said, I am even more concerned about pressing my case.

Pat McFadden (Labour, Wolverhampton South East)

I do not know whether what I have to say will ease the hon. Lady’s concern. The alternative set out in the amendments could leave the system open to abuse. For example, it could give someone who was accused of an offence a mechanism to delay the enforcement process by opting for a criminal prosecution and thus requiring the regulator to undergo another process after it has gone through the process of setting out its case and presenting all its evidence. There is a right of appeal to an independent tribunal but, as I said in respect of the previous amendments, we want a system that does not have to go through the same processes over and over again.

Allowing a person to choose which route to go down would not be in keeping with the Macrory review. In a proportionate sanctioning regime, criminal prosecution should be reserved for the most serious cases. That remains a weapon for serious breaches of the law. We are not saying that the new sanctions should replace that system entirely, but that they should replace it in some circumstances, and that can be assessed by the regulator only in view of all the cases before it.

The choice between civil and criminal sanctions should remain at the discretion of the regulator, not the person who is accused of the offence. We understand the concerns that members of the Committee might have about the new sanction powers being misused.

Ann McKechin (Labour, Glasgow North)

Can my hon. Friend confirm that, in Scotland, such measures would be inappropriate, as the decision whether to prosecute is in the hands of the procurator fiscal who takes the action on behalf of the regulatory authority? The regulatory authority does not have the discretion in that regard.

Pat McFadden (Labour, Wolverhampton South East)

The principle to which my hon. Friend referred is right. It is not for the accused to choose their route, which would be the result of the amendments. For both fixed monetary penalties and discretionary requirements, there will be an opportunity for a person to make representations to the regulator before the sanction is imposed. It will enable the person to raise defences and challenge the case against him or her and to challenge the evidence relied on by the regulator.

The ultimate appeal will be referred to an impartial, independent tribunal. The tribunal will also have the power to overturn or reduce the level of the penalty imposed by the regulator or take any other steps that the regulator could have taken in relation to the incidents of regulatory non-compliance. The Bill contains broader safeguards in the form of the review clauses that we referred to earlier—such as that relating to part 3—and suspension provisions, which we discussed in relation to parts 1 and 2.

Mark Prisk (Conservative, Hertford and Stortford)

It is a peculiar argument that, if someone is allowed the option of choosing the criminal path, that will somehow lead to a flood of cases. The truth is that an individual would choose that path under only the most exceptional circumstances. Does the Minister recognise that it would be a tiny number? Clearly, most businesses would not wish to go down that path. It is a thin argument.

Pat McFadden (Labour, Wolverhampton South East)

The hon. Gentleman allows me to turn again to the impact assessment. That states that from the Bill’s overall estimated benefit to business—which comes to an annual sum of £200 million—the biggest proportion will probably come through this part of the Bill due to savings made from fewer court appearances for businesses and fewer lengthy legal costs in criminal prosecution cases. Those are significant savings to business.

Mark Prisk (Conservative, Hertford and Stortford)

It is a fascinating extract, I am sure, but it does not answer the point. The idea that having that option available will suddenly regularly increase the burden to business is not right. This will affect a tiny handful, a very small proportion of businesses. It is about ensuring, where there are no other options and no independent person to appeal to before being found guilty, that this option exists should a business feel that it would like to have its day in court and stand before the law. That is why it would exercise it and that is why it is an important principle.

Pat McFadden (Labour, Wolverhampton South East)

In the end it comes down to a judgment about the safeguards in the Bill. We had this discussion on the previous set of amendments that were moved by the hon. Gentleman and this is a similar matter. The Government’s view is that there should be the right to make representations to the regulator on the basis of a notice of intent being issued—something set out in the clauses that the amendments seek to change. The notice of intent must include the grounds for the proposal and set out the right to make such representations, objections and so on. There is also the right of an independent appeal to the tribunal, which is independent, impartial and separate from the regulator. As I said, should we judge that the powers are not being used properly after the enactment of the Bill, the wider review and suspension provisions provide adequate safeguards. In the end, it is also a judgment about whether the person accused or the regulator should decide the path of its function.

Ann McKechin (Labour, Glasgow North)

Does the Minister agree that we should stick to the general principle that prosecutions should be taken if they are in the public interest, not because of personal requirements? I am disappointed that the Opposition do not recognise that prosecutions should be taken in the public interest. There is a general principle that should be applied here and that is what the Bill tries to put in place.

Pat McFadden (Labour, Wolverhampton South East)

I agree with my hon. Friend, and I am happy to confirm to her that officials did consult the office of the procurator fiscal on the measures.

Lorely Burt (Liberal Democrat, Solihull)

I was interested to listen not only to the Minister but to the hon. Lady. I do not agree that public interest should override individual fairness. I have listened carefully to the Minister when he talked about people who might try to exploit the system and delay the process for their own financial ends. Even so, if justice is done then in the end these individual companies will be punished. The delay in punishment of a few rogue traders should not be at a loss to everyone else, particularly companies that are innocent or that value greatly the loss of their reputation, which is an extremely serious consequence for them. I do not believe that the regulator or anybody else should take that right away from them.

To use an analogy from civilian life, a person might be accused of stealing a loaf of bread, but they have the option of electing to go before a jury, not because of the value of the loaf of bread but because of the value of their individual reputation. I do not believe that that option should be taken from companies. I therefore wish to press the amendment.

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 41, in clause 40, page 19, line 4, at end insert—

‘(5A) The final notice must offer the person the opportunity to pay the prescribed sum mentioned in subsection (2)(b) within a specified time limit.’.

The amendment would insert between subsections (5) and (6) of clause 40 the phrase:

“The final notice must offer the person the opportunity to pay the prescribed sum mentioned in subsection (2)(b) within a specified time limit.”.

What is this about? It is very simple in a way. It is the classic dilemma that one faces when confronted with a notice to pay something or an accusation: should one make a representation and lose out as a result? The amendment would correct that. A defendant should not be at a disadvantage simply because they want to make a written representation or an objection. Justice is not well served by placing a pressure on a defendant to accept a penalty regardless of their innocence in order to reduce the potential fine. The amendment would ensure that if someone decided, as they are entitled to, to make a written representation and if that representation was overruled, that defendant would still receive a discount for any other payment. There should be no financial inducement one way or the other; they should be able to make those representations.

Pat McFadden (Labour, Wolverhampton South East)

I understand the sentiment behind the amendment. I do not want to put words into the hon. Gentleman’s mouth and I am sure he will correct me if I am summarising this wrongly, but I think that what he is trying to say is that people should not be penalised for choosing to make representations. I understand that, but I believe that the amendment is not necessary to ensure that that is the case. Clause 40 allows the discharge payment to be set at a lower level than the fixed monetary penalty to, for example, reflect procedural savings from an early admission to liability by a business, so we have that already. Once the penalty has been imposed, clause 52(1) deals with the situation that he is concerned about. The clause states:

“An order under this Part...confers power on a regulator to require a person to pay a fixed monetary penalty.”

That may include provision “for early payment discounts” and so on. The provision allows the regulator to offer an early payment discount should a business decide to pay the penalty immediately. That is once the penalty has been imposed. The discharge payment and early payment discount could be set at the same level. We obviously need to specify that in the Bill as there may be circumstances in which the amounts could differ. The amount of the discharge payment and the fixed monetary penalty and any subsequent early payment discount will be set out in the order made under part 3. As I said before, such orders will be subject to the affirmative resolution procedure, so Parliament will have the ultimate say in deciding that.

Mark Prisk (Conservative, Hertford and Stortford)

May I take it that the Minister is saying that it is the intention of the Government, when presenting such an order, to ensure that no such penalty—from making a representation or seeking an objection—will be unintentionally permitted through any order? Do the Government intend to ensure that someone in the circumstances that I have described in my amendment would not be penalised?

Pat McFadden (Labour, Wolverhampton South East)

I think that the situation is certainly covered. I hesitate to say that it is covered in every instance. The discharge payment and the early payment discount, as set out in clause 52(1), could be set at the same level and that would be determined when the order comes forward. I do not think that the hon. Gentleman’s amendment is necessary, but I hesitate slightly in saying that that would be the case in all circumstances.

Mark Prisk (Conservative, Hertford and Stortford)

That has been very helpful. The Minister has married clause 52 together with clause 40. I was not clear that the two welded together quite as neatly as he and his advisers were able to adjudge. I am encouraged by the fact that it is clearly not the Government’s intention for someone to suffer such a penalty. I understand that one or two areas may slip through. If it is going to be an order by positive resolution to come before the House to ensure that such arrangements are made in detail, that gives me due comfort. On that basis, I beg to ask leave to withdraw the amendment.

Clause 41

Pat McFadden (Labour, Wolverhampton South East)

The clause ensures that where the regulator serves a notice of intent on a person prior to imposing a fixed monetary penalty, that person cannot be criminally prosecuted for the same event to which the notice relates during the period within which they can discharge their liability to the penalty. Similarly, a person cannot be prosecuted for the same event if they discharge their liability to the penalty or the regulator decides to go ahead and impose it. That is down to familiar reasons of double jeopardy. Unpaid monetary penalties will be forced through the civil courts. The Bill, and clause 52 in particular, will ensure that regulators have access to an efficient and streamlined procedure for recovering monetary penalties.

Clause 42

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 42, in clause 42, page 19, line 35, after ‘determine’, insert

‘subject to a maximum amount to be prescribed by order by a Minister of the Crown’.

Amendment No. 42, ironically to clause 42, deals with discretionary requirements and tries to put some form of cap, some maximum limit, on the amount of fine. At the moment, the regulator can impose whatever fine it wishes. There is no stated maximum in the Bill. Given that the regulator has wide powers to investigate, effectively prosecute and be the jury, it seems inappropriate to provide unlimited powers regarding the scale of the fine. There needs to be some appropriateness, not least given the principles that we are meant to be following in terms of Hampton and Macrory. Therefore, the purpose of the amendment is, first, to send that signal. There is a need for the regulators to have a clearly defined limit, but the amendment would allow the Minister to set that limit, and do so by order. There is some flexibility; we have not sought to put a figure on that limit. I would be interested to hear the Minister’s response to the points that underscore the amendment.

Pat McFadden (Labour, Wolverhampton South East)

The amendment intends to impose a cap on variable monetary penalties. We have a cap on fixed monetary penalties, but that goes back to the point made by the hon. Member for Solihull about the punishment fitting the crime. The cap for fixed monetary penalties relates to the nature of the offences; having a cap for variable penalties would be analogous to capping Crown court fines. A cap on variable penalties, while debated a lot in the other place, is different from a cap on more minor, summary offences. We continue to believe that a cap for the most serious offences would not be appropriate. I would be interested to know what level the hon. Gentleman thought might be appropriate. Even in the current regime, without the new powers, sanctions and fines that run into millions of pounds have been imposed. I am not sure where such a cap would be set in any meaningful way.

The issue is not just the level of the fine, but the kind of offence. The hon. Member for Solihull is right that the level of penalty should be related to the level of offence, rather than being a number that a Minister may set down in an order. Regulators must be able to capture any financial benefit gained from non-compliance. One of the weaknesses of the current system is that sometimes fines imposed are small in relation to the benefit that the offender has gained by committing the offence. That was one of the recommendations in both Hampton and Macrory. If a business knows that profit gained from committing the offence will be removed, with the possibility of an additional penalty on top, a potential incentive to try to break the law and get away with it is removed. We fear that if a cap on the fine is set down, that could deter compliance and militate against ensuring a level playing field for compliant businesses.

In making an order under part 3 of the Bill, the Minister may consider whether a cap is necessary, but we do not think that there should be an obligation on the Minister in every case, as I believe would be the effect of the amendment. Setting a cap on the monetary penalties is not simple, because it involves deep knowledge of the regulatory law, the relevant market conditions and the amount of benefit that has accrued to the offender through committing the offence, over what could be some time. Professor Macrory ruled out a cap based on a business’s turnover, as he thought that that would pose undue legal complexity. The regulator will be required by clause 62 to publish guidance, setting out the criteria that it is likely to take into account when setting the level of variable monetary penalties, so there will be some transparency in the process, but the amendment proposes a mechanism that would effectively cap variable monetary penalties in every case.

Judy Mallaber (Labour, Amber Valley)

My hon. Friend referred to the Macrory report. Does he agree that some of the fines that it quotes for health and safety offences are absolutely shocking? Some businesses have benefited 10 times as much by non-compliance as they have ended up being fined. Any cap on discretionary fines would not enable the necessary discretion to charge a business a low fine where appropriate while ensuring that an organisation doing something completely out of order was not left in pocket as a result of non-compliance.

Pat McFadden (Labour, Wolverhampton South East)

That is one danger of capping in every case. I am not saying that a cap would never be appropriate in any circumstances, but the amendment as I understand it would cap in every case. Making the punishment fit the crime, or imposing a penalty appropriate to the gain accrued to a business for its non-observation of the law, is an important and relevant problem.

A list of possible criteria for the variable monetary penalties is set out in page 38 of the guide to the Bill. They include the seriousness of the non-compliance, the business’s disciplinary record and whether the business has taken any action to address the harm caused by non-compliance, and they may differ from area to regulatory area. A business will, of course, be able to raise objections to and make representations about the level of penalty after the notice of intent is issued and, again, will be able to appeal against the penalty if it considers the amount unreasonable. If the tribunal agrees with the appellant, it will have the power to withdraw or vary the penalty imposed.

To sum up, requiring a cap on variable monetary penalties in every case might mean that regulators were tempted back down the road of criminal prosecution. There is no limit on Crown court fines, and many of the offences that we are discussing would be triable in Crown court. We do not want to create an incentive between the two regimes for regulators to favour criminal prosecution in the Crown court, which has no cap, to a system with a cap in every case. I understand the point made by the hon. Member for Hertford and Stortford, but I hope that he will decide on that basis not to pursue his amendment.

Mark Prisk (Conservative, Hertford and Stortford)

It has been a helpful debate. As the Minister rightly said—I think that it is the most important point in the Bill—guidance has already been established. He explored several instances, which I did not notice in reading the explanatory notes, that set out the options available when considering a cap, and not only the options available to Ministers. The Government, rightly, do not reject the principle of a cap but rather recognise the dangers of limitation. I fully understand.

It is also important, however, to bear in mind that the amendments are a symptom of a wider concern. The nature of the system is such that someone whose guilt must be proved against them does not have the option of putting their case before an ordinary court of law, so one wants to make sure that the Government are aware of the dangers in the other parts of the system, hence the amendment and some of the previous amendments.

My purpose in tabling the amendment was to establish exactly what the Government’s view of the caps was. They clearly accept the need for caps in certain cases, and I agree, but on balance, I think that the Minister is probably correct to say that it would be a mistake to write a statutory, narrow and strict requirement into the Bill. That is a perfectly reasonable argument. It has been a useful debate, and on that basis I beg to ask leave to withdraw the amendment.

The rest of the debate is in Hansard.