Regulatory Enforcement and Sanctions Bill [Lords]

Public Bill Committee, 19 June 2008.

Further written evidence to be reported to the House

Clause 46

Pat McFadden (Labour, Wolverhampton South East)

We have made fairly brisk progress so far. Let us see what today holds for us.

When we adjourned the other day, we were in the midst of discussing part 3 and had completed our debates on clause 45. Part 3 offers a new range of options to regulators as alternatives to criminal prosecution in order to ensure compliance. One important option, set out in clause 46, is the stop notice.

The stop notice would apply to situations in which there was an ongoing dangerous activity—for example, the leak of hazardous material on to land or water or in a factory. In such situations, the regulator would have to do exactly what it says on the tin and say stop. A stop notice would prohibit a business from carrying on the activity specified in the notice, and the notice would remain in place until the person had taken the steps specified in it.

Subsections (4) to (6) give the grounds for issuing a stop notice. They state that the notice may be issued only if the activity

“is causing, or presents a significant risk of causing, serious harm to...human health...the environment...including the health of animals”—

or the “financial interests of consumers”. The regulator must also “reasonably” believe that the activity as carried on by the business

“involves or is likely to involve the commission of a relevant offence”.

The provisions are important because they also allow the regulator to impose a notice when an offence has already been committed and if an offence is likely to happen. The Government believe that in certain circumstances a regulator should be able to issue a stop notice to prevent an offence from occurring if there is a risk to the public or the environment. Indeed, it would seem odd to instruct regulators to sit back and wait if they believed that that could happen.

Subsection (7) ensures that the steps specified to be taken in the notice must be limited to compliance steps. Given the sometimes onerous nature of stop notices we feel that it would be inappropriate to allow regulators to include broader steps in the notice.

Mark Prisk (Conservative, Hertford and Stortford)

I do not profess to be an expert on non-criminal sanctions, but will the Minister clarify whether the cases identified in subsection (4) mirror those of the stop notices currently available in law? The subsection has three specific provisions, and I want to be sure that there is no significant variance from established cases.

Pat McFadden (Labour, Wolverhampton South East)

I am happy to confirm that.

I was approaching the end of my remarks. I now conclude. Stop notices will be an important part of the regulator’s toolbox and will provide important protection for the public. Alongside the fixed and variable monetary penalties that we have already discussed, they have an important function.

Mark Prisk (Conservative, Hertford and Stortford)

I thought when the Minister began his speech that he was going to say it was a “Prisk” process, but it seems that we have made brisk progress. After that fourth-form attempt at humour, I shall move swiftly on.

Stop notices have considerable merit. The Minister rightly spoke of instances when immediate action is required and urgency is the essence. We have been assured that the cases are the same as under established stop notices. In principle, we have no problems with the use of the sanctions in those circumstances, although we will have questions about procedure when we discuss clause 47.

Lorely Burt (Liberal Democrat, Solihull)

Welcome back to the Chair, Mr. Chope, to what may be the last day of our considerations.

On behalf of the National Consumer Council, I want the Minister to explore the nature of stop notices. The council is concerned that the test that the regulators must prove before issuing a stop notice is too high and that

“a significant risk of causing...serious harm”

is perhaps too high a barrier. I understand the grave importance to any business of having a stop notice issued against it. However, if an activity could be described as having a harmful consequence but not necessarily falling into a serious category, I am worried about how much leeway an individual inspector might have before issuing the stop notice.

Pat McFadden (Labour, Wolverhampton South East)

In some ways, the hon. Lady has answered her own question. As she rightly pointed out, subsection (4)(b) states that there is a case when

“the regulator reasonably believes that the activity as carried on by that person is causing, or presents a significant risk of causing, serious harm”.

The provision is onerous in some ways, but we are talking about serious and significant harm. The hon. Lady asked for an example. Hazardous material or toxic substances could be leaking on to land or into the environment, and of course that is serious. A stop notice being issued in those circumstances could mean that the business closes down completely until the problem is sorted out. If someone is wielding a power that can cause a business to close down, it is right that the threshold at which that happens should be high. That is why, in some ways, the threshold is higher for stop notices than for some other penalties under the Bill.

Stop notices will not be an everyday occurrence when a breach might have happened. I use the word subjectively—the breach could be minor, or it could be fixed with restorative action by the person or business concerned. There could be breaches of regulations that are not in themselves a danger to human health or the environment, so there could be another sanction in such circumstances. However, given the seriousness—I intend no pun—of stop notices, the use of the words “significant” and “serious” probably set the bar at the right level.

Clause 47

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 43, in clause 47, page 23, line 32, leave out ‘14’ and insert ‘7’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss amendment No. 51, in clause 47, page 23, line 32, leave out ‘within’ and insert

‘as quickly as possible and no later than’.

Mark Prisk (Conservative, Hertford and Stortford)

The amendment would change the current provision whereby a completion notice is issued within 14 days to within seven days of such an application. As we learnt in the debate on clause 46, stop notices are often used in urgent circumstances. The Minister referred to a possible chemical leak or something of that nature, and urgency is clearly at the heart of this form of sanction. Equally, it is often the case—in fact almost invariably—that compliance is evident. It is visible to the inspector and is usually fairly straightforward. In most circumstances, when one asks someone to stop doing something, it is reasonably straightforward to identify quickly that that has happened. Given that fact, 14 days seems a long period in which to issue a completion certificate. As I said, in most cases, it is fairly evident whether the activity has ceased.

When the situation is one of harm—the usual circumstances in which the stop notice is used—it is in the specific interests of the regulator to ensure that action is prompt as well. Therefore, there is a strong case for saying that 14 days is a very long period. That is why I think that seven days will be sufficient for the regulator to issue a completion certificate. Most cases involve attending a site, seeing that the activity or potential harm has been ceased, and thus being able to identify that directly.

I realise that there may be one or two incidents in which the regulator is not able to manage a particular series of incidents. However, those would be the exception. It is important that we send out the message that stop notices are for urgent issues and for ceasing specific activities. The regulator, therefore, should be able to issue the certificates in a similarly prompt manner. I hope the Minister will respond positively to an amendment that improves this part of the Bill.

Lorely Burt (Liberal Democrat, Solihull)

Our amendment No. 51 is very much in the same spirit as the Conservative amendment No. 43. The difference is that our amendment acknowledges that there may be occasions when 14 days are necessary. Any arbitrary line that one draws will always have a problem one way or another. What is important about our amendment is that it emphasises the importance and urgency of making the decision as quickly as possible, and no later than 14 days. It keeps the 14-day deadline, but—like the Conservative amendment—it seeks to inject a note of urgency.

Closing a company for any period of time can be seriously harmful to its future. We wish to see those few words added to the clause so that no one can be under any illusion that it is very urgent—just as urgent as the issuing of the stop notice itself—to issue the other certificate as quickly as possible once there is compliance.

Pat McFadden (Labour, Wolverhampton South East)

I have a significant degree of sympathy with the points that have been made. The hon. Member for Hertford and Stortford said earlier in our proceedings that time is money, and he is right about that. Time is money for businesses and there should not be undue delay in responding to a request for a completion certificate to be issued. We are talking about a situation in which a person on whom a stop notice has been served may apply for a completion certificate and the regulator must decide whether to issue one within 14 days. The clause requires the regulator to issue a completion certificate once they are satisfied that the business has taken the steps specified in the stop notice. That allows the business to carry on its activity as before, with the problem having been rectified. I would expect that to happen as soon as is practical for the regulator. It is important that the Committee understands that 14 days is a maximum. The clause says “within 14 days”, so 14 days will not be the norm.

The procedure in clause 47(2)(e) allows a business to request a certificate from a regulator confirming its compliance. It is a safeguard intended to ensure the ongoing monitoring of the operation of the stop notice. The amendments suggest either a seven-day limit, or the insertion of extra words to ensure that 14 days is seen as a maximum. Although I understand the hon. Gentleman’s point—he is right to say that time is money—we believe that on some occasions it could cause difficulties. A seven-day limit might not always provide the regulator with sufficient time to assess fully whether a business has complied with the notice.

I will continue with the example that I used in relation to clause 46. A business might, for one reason or another, have been releasing some kind of toxic substance into the land. It could then have had a stop notice imposed on it for the leaking pipe that was emitting the waste, and the regulator might need to test whether the toxins had returned to an acceptable level, below which there was no danger to public health. In such a case, the regulator might have to wait for test results to be returned from a lab before it could confidently say that the business was complying. It might also have to contact a third party that might be involved, and ensure that that third party did not continue to suffer the harm that the original instance had caused to it.

I do not believe that such situations should be allowed to carry on for ever. There has to be a limit, which is why there is a limit in the Bill. A maximum limit of 14 days strikes the right balance between providing a safeguard for business, where time is money, and allowing regulators sufficient time to assess whether the business has complied.

Amendment No. 51 accepts the 14-day limit but seeks to add extra words. I have sympathy with that, but I do not feel that those extra words are needed to stress that 14 days is a maximum. The clause says “within 14 days”. Perhaps I can offer additional comfort to the hon. Member for Solihull, as I am happy to confirm that we will amend the guide to the Bill so that it states explicitly that 14 days is a maximum period, and that in practice we expect certificates to be issued as soon as possible within that.

Mark Prisk (Conservative, Hertford and Stortford)

I understand the toxicology issues, and the Minister has made important statements today that have not been made before. Clearly, there will be certain circumstances in which those toxicology studies will not be available for some time beyond 14 days. Can the Minister tell us, and those who might be affected by the legislation, what will happen in those circumstances?

Pat McFadden (Labour, Wolverhampton South East)

As I said, the process cannot be limitless as that would place the business in an unfair situation. A judgment must be made and we feel that 14 days strikes the right balance between allowing the regulator to do whatever tests are necessary, and not putting the business under a cloud of uncertainty or even a continuing state of closure. This is a judgment about how one strikes that balance. The hon. Gentleman feels that seven days is right, but we feel that 14 would cover more situations and that is our judgment.

Mark Prisk (Conservative, Hertford and Stortford)

This is a helpful debate. Presumably—to continue with the example we have been using—there would be no prohibition on the subsequent issuing by the regulatory authority in question of a stop notice, in the event of a subsequent leakage. Would there be an opportunity, therefore, if for example a delayed toxicology study were to be presented at 21 days, for the authority to issue a stop notice at that point?

Pat McFadden (Labour, Wolverhampton South East)

A stop notice could be issued twice, but as I have said it is an onerous sanction and not something that either the regulator or the business would want to go through repeatedly. The purpose of including an onerous option of that kind in the regulator’s toolkit is precisely to deal with those urgent and serious situations that we have discussed under clause 46, so the hon. Gentleman makes a fair point in saying that the process could be repeated, but we are trying to frame the stop notice procedure in such a way that problems will be dealt with by issuing one notice, dealing with the problem and moving on. That is the right way to tackle such a problem.

Mark Prisk (Conservative, Hertford and Stortford)

It is an extremely helpful debate. I am not quite sure why, but when the issue came up in the other place Ministers seemed either unable or unwilling to utter the words that the Minister has just said: that he sees the period as a maximum and that there is an expectation that the completion certificate will be issued well within that period. There is a dilemma, in the sense that I suspect that, if a need was seen for a late toxicology study to force a second stop notice, most businesses affected would regard it as much more onerous, because of the need to stop and restart a process that had been begun. I think therefore that there is a problem with that.

I am partly comforted by the Minister’s assurance—which I know will partly be coloured by later guidance to be issued by Ministers. We have clarified something that was not clear from the deliberations in the other place and made some welcome progress for businesses that have been concerned about the provision, several of which have contacted me directly. I beg to ask leave to withdraw the amendment.

Lorely Burt (Liberal Democrat, Solihull)

There is also my amendment.

Christopher Chope (Conservative, Christchurch)

I do not know whether the hon. Lady wanted to press her amendment, but she did not indicate that she did, and we take only the lead amendment in any grouping. All the others must be moved separately; otherwise they fall automatically.

Lorely Burt (Liberal Democrat, Solihull)

No; I was inquiring only about seeking leave to withdraw it, so that is fine.

Christopher Chope (Conservative, Christchurch)

There is no need to withdraw an amendment that has not been proposed.

Clause 48

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 56, in clause 48, page 24, line 15, at end insert ‘and any subsequent appeal.’.

The amendment would improve the current wording of subsection (1) of the clause, which is about compensation in relation to stop notices. Subsection (1) states:

“Provision under section 46 conferring power on a regulator to serve a stop notice on a person must include provision for the regulator to compensate the person for loss suffered as the result of the service of the notice.”

We want to insert at the end of that subsection the phrase, “and any subsequent appeal”.

The provision is designed principally to enable small businesses in particular to appeal without fear that they will not be able to recover costs simply because they wanted to challenge the notice in the first place. The Minister agreed in previous debates that no one in the relevant circumstances should be deterred from making representations or appealing—knowing that they would then be out of pocket. It is an important principle, and the Minister agreed to it in a previous debate. I do not want to make this a long debate, so I simply ask the Minister whether he now accepts that principle, and if so, whether he will accept the amendment. It is fair that there should be no circumstances in which someone who wishes to make an appeal is deterred by the fact that they will be out of pocket as a result.

Pat McFadden (Labour, Wolverhampton South East)

I am happy to confirm our earlier exchange about accepting the principle that the hon. Gentleman outlined. I can also give him the good news that the amendment is unnecessary because the situation that he is talking about is covered. As he rightly said, the clause includes provision for the regulator to compensate a person for losses suffered as a result of the service of the notice. That would include any period during an appeal when the notice was still in force. I understand the sentiments behind what the hon. Gentleman is trying to do in the amendment, but the clause requires the regulator to put in place a scheme to compensate a person for a loss suffered as a result of the service of the notice. I am happy to confirm that that would include ongoing losses suffered during an appeal when the notice was still in force. The amendment would therefore add nothing to the arrangements covered in the Bill.

Mark Prisk (Conservative, Hertford and Stortford)

I am fascinated. At least two lawyers from different organisations told me that there was a significant omission in the Bill and that it was important to have a provision to deal with that. In response to their comments, I felt that it was important to table the amendment. However, if the Minister is happy to confirm firmly on the record that there is a provision in the law, we have scored a goal without even starting the game. I am very happy if that is the case, not least because the Minister’s words are now firmly on the record. Although I suspect that we would all like the opportunity to divide the Committee to ensure that the issue is dealt with, there is no need. Therefore, I beg to ask leave to withdraw the amendment.

Clause 50

Pat McFadden (Labour, Wolverhampton South East)

Clause 50 takes us on to a slightly different issue from that of stop notices, which we have been discussing so far this morning. It comes at the issue of regulatory compliance from a slightly different angle. The clauses and amendments that we have discussed so far have dealt with the options available to a regulator to ensure compliance, and stop notices are part of that. Clause 50, however, offers an option to the regulated, rather than just the regulator.

The clause enables a Minister to make an order allowing a regulator to accept enforcement undertakings offered by a person or business subject to regulation. An enforcement undertaking is an undertaking or promise by a person or business to take certain actions. It is not something that can be imposed by the regulator, but an option that is available to a business that is found to be in contravention of the regulations. The clause takes forward a key recommendation of the review by Professor Richard Macrory and allows businesses to volunteer action to put right any harm that has been done.

Under subsection (1), the regulator may accept enforcement undertakings only when it has reasonable grounds for suspecting that an act or omission by a person constitutes a relevant offence. In practice, that is likely to mean that the business is offering undertakings during an investigation for an offence. Subsection (3) outlines the type of action that an undertaking must cover, which

“must be...action to secure that the offence does not continue or recur...action to secure that the position is, so far as possible, restored to what it would have been if the offence had not been committed...action (including the payment of a sum of money) to benefit any person affected by the offence, or...action of a prescribed description.”

Mark Prisk (Conservative, Hertford and Stortford)

Can the Minister confirm that, while the test of reasonableness is clearly set out in subsection (1), the principle of reasonableness would also be incorporated in the case of an action of securing a position that is to restore what would have been, had the offence not been committed?

Pat McFadden (Labour, Wolverhampton South East)

The regulator will have to judge, after an enforcement undertaking has been offered and if it has been accepted, that it has been complied with. The regulator must make a judgment. As I said, subsection (3) sets out the types of things that we are talking about. Subsection (4) provides that if an enforcement undertaking is accepted, the person may not be prosecuted for the offence, or have a fixed monetary penalty or discretionary requirement imposed on them, unless they fail or are deemed to have failed to comply with the undertakings.

We are saying that if a business, in the course of such an investigation, says, “These are the actions that we wish to take in order to put this matter right”, and it has come forward in such a way, it should benefit from doing so. There should be an incentive to do so, rather than its being placed in a situation where the option is available but if the business exercises it, it gets no benefit, because it is equally liable to all the other penalties that we have been talking about.

That is in a situation where there is compliance, but—a significant but—where a person fails to comply with their undertaking, the regulator will be able to prosecute the person for the original offence or impose a fixed monetary penalty or discretionary requirement. Subsection (5) enables the Minister to include further provision in the order, such as the procedure for entering into the enforcement undertaking, publication of the details, certification by the regulator that that has been complied with, and so on.

There is not a right of appeal against the enforcement undertaking itself, given that that is something volunteered by the person and not imposed on them by the regulator. We believe in allowing enforcement undertakings. We can envisage a reputable, well-intentioned business coming forward to exercise that option. The lack of compliance may be completely inadvertent. It may be that it did not know that it was not compliant, but it is something that it is more than happy to put right. That could be an important option available. It is something that was encouraged by Professor Macrory and is another important addition to the Bill.

Clause 52

Pat McFadden (Labour, Wolverhampton South East)

I rise because clause 52 relates to a debate that we had earlier. The hon. Member for Hertford and Stortford asked about discounts, to which the clause relates. It might be helpful to the Committee if I outline what is covered here.

Clause 52 deals with the enforcement of monetary penalties. The clause allows the order made by the Minister under this part of the Bill to make provision for discounts for early payment of a monetary penalty and for the payment of interest as a financial penalty for late payment of the original penalty. However, the total amount of any late payment must not exceed the total amount of the penalty imposed—there is a limit on that.

I hesitate to use the parking fine analogy because the situations that these clauses deal with are significantly more important and on a greater scale, but the principle of early payment in such situations is one that we are all familiar with from that context. The Government believe that early payment discounts can be a helpful incentive to encourage businesses to comply promptly with fixed monetary penalties. Late payment penalties could provide a useful enforcement tool for regulators. We had a discussion the other day about the Companies House precedent and the potential for penalties for late filing. The Government also believe that if financial penalties are to be effective, there needs to be an enforcement process. Subsection (2) provides for the enforcement of unpaid penalties and any interest or late payment charges through the civil courts. It allows the order to create a more streamlined process accompanied by treating the penalty as if it were payable under a court order. In practice, that would mean that the regulator could skip the initial stages of registering a claim for the unpaid sum in the courts and then proceed more swiftly to enforcement action. The principle is one that we are familiar with: incentives to pay early and penalties for paying late.

Mark Prisk (Conservative, Hertford and Stortford)

I do not have a huge objection to the idea of early payment discounts, but the discount should not be so deep that it skews the system, such that many small businesses feel they should just pay up and move on. The danger is that the system would start to become imbalanced. The Minister has indicated previously, however, that businesses would not be at any disadvantage financially should they seek to challenge or make objections. My principal concern is to ensure that if someone wishes to challenge and question what has happened, they are able to do so and are not at any financial disadvantage.

Pat McFadden (Labour, Wolverhampton South East)

I absolutely understand the point that the hon. Gentleman is making and I agree with him about not being at a disadvantage if one pursues the processes that are outlined in the Bill. We had an exchange on this subject a few moments ago. He was keen to say to me that I had clarified what had not been clear in the Lords. I should make it clear that this is not a new change in the Bill; it is how the tribunal system will work under section 29 of the Tribunals, Courts and Enforcement Act 2007, which created first-tier tribunals. The tribunal has the power to award

“The costs of and incidental to”

any proceedings before it. That covers the point that the hon. Gentleman is making but it is not an addition to the Bill; it is actually already in place in that Act, which created the tribunals to which the appeals will be made.

Mark Prisk (Conservative, Hertford and Stortford)

I shall conclude my remarks by saying that we have probably exercised this issue up and down and in and out. On that basis, I shall not delay the Committee any further.

Clause 54

Pat McFadden (Labour, Wolverhampton South East)

It is important to pause on clause 54 because much reference was made during our debates here, but also in the other place, to the judicial protections for people who are subject to the regulations. Clause 54 requires that appeals under part 3 of the Bill must be heard by either the first-tier tribunal or another statutory tribunal specified by the Minister in the order made under that part. An appeal to such tribunals provides an important safeguard for businesses against the misuse of the civil sanctions. These tribunals are independent, impartial and highly qualified to review a regulator’s sanctioning decision.

Professor Macrory, to whom I have referred a lot, found in his report a number of advantages in routing appeals against the new sanctions to a specialist, expert tribunal, rather than to the courts. First, that will allow the criminal courts to concentrate on those issues that warrant prosecution rather than adjudicating on civil appeals. Secondly, tribunals can comprise members with legal and specialist expertise in the subject matter before the tribunal, thereby providing the tribunal on some occasions with a fuller understanding of the regulatory issues. In another part of my work, I am the Minister for employment relations, and have contact with the employment tribunals, where the role of these wing members, as they are sometimes referred to, or expert members, is often highly valuable. Regulatory cases could be concentrated through one tribunal under the first-tier tribunals heading as well, enabling expertise to be built up over time. For example, in the cases of regulatory non-compliance in magistrates courts, they make up less than 1 per cent. of all the cases, so it is difficult to provide specific training to magistrates and legal advisers for a field of law that, in percentage terms, is a small part of their work. This gives us the capacity to build up over time significant concentrated expertise.

We have talked about small businesses, and it is also the case that tribunals rather than courts may often encourage small businesses to exercise their rights of appeal without the need for expensive legal representation. As I said, our preferred venue for such appeals is the first tier of a tribunal, which is created by the Tribunals, Courts and Enforcement Act 2007. The first-tier tribunal will be launched later this year, and most existing tribunal jurisdictions, such as the transport tribunal, the information tribunal and the gambling appeals tribunal, will eventually transfer across to become part of this. These jurisdictions will be grouped together to form different chambers, and it is expected that a regulatory chamber will hear appeals against sanctions for regulatory non-compliance.

Most of the detail concerning composition, functions, procedures and powers and so on is contained in the 2007 Act rather than in this Bill, but I want to make it clear to the Committee that this is the vehicle that we see as dealing with appeals. The tribunal will have legal members who are professionally qualified in appropriate fields, and other experts. The composition of a tribunal for a particular field will be determined partly by statutory orders to be made by the Lord Chancellor, specifying qualifications and numbers, and partly by the senior president of tribunals and other judicial leaders. I should stress that regulators and their sponsoring Departments will not have any influence in such matters: the independence of the tribunal panel is further guaranteed by section (1) of the 2007 Act, which extends the courts’ statutory guarantee of independence under the Constitutional Reform Act 2005 to the tribunals.

There is an exception to all this in clause 54 (1)(b), which says that the appeal could be held by

“another tribunal created under an enactment.”

That is to take account of the fact that a number of statutory tribunals will not be transferring. The employment tribunals are a good example of that. They currently hear, for example, some health and safety appeals, so that is covered by subsection (1)(b). However, they have similar characteristics and safeguards to the first-tier tribunal.

Subsection (2) makes it clear that statutory tribunals only, not ordinary courts of law, can be specified. However, they have similar characteristics and safeguards to a first-tier tribunal. Subsection (3)(a) allows the Minister, when setting out the power, to make provision for the suspension of the effect of a fixed penalty or other requirement during an appeal. A person could apply for a stop notice to be suspended pending the result of an appeal. If that application is unsuccessful, the notice will remain in force during the appeal. However, should the person appeal, the effect of the stop notice can be automatically suspended until the result is known.

Subsection (3)(b) enables the Minister to make provision about the powers of the tribunal. Examples of those powers are set out in subsection (4), which details that the tribunal may

“withdraw the requirement or notice...confirm the requirement or notice...take such steps as the regulator could take in relation to the act”

or

“remit the decision...to the regulator”.

The Bill is not prescriptive about the powers of the tribunal, because a tribunal may have existing powers. Detailed rules governing the exercise of the powers will be provided in the tribunal procedural rules that will be made under existing provisions of other Acts—I have mentioned the Act that establishes such things.

The clause is an important part of the machinery. We have talked a lot in our debates on this part of the Bill about the different enforcement options available to regulators, such as fixed monetary penalties, variable monetary penalties, stop notices, restoration acts, restoration notices and so on. The rights of appeal that we are talking about to deal with the problem of judge and jury being one are set out in the clause.

I hope that is helpful in assuring members of the Committee that the measure is a robust and important part of the enforcement mechanism.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the Minister for those remarks. As he said, we have rehearsed the arguments as to whether the measure provides a sufficient protection as an appeal process in the absence of the ability of someone whom we might call the accused to refer their concerns to an ordinary court of law, so I do not propose to go over them again.

The clause permits appeals to be heard either by the first-tier tribunals, which the Minister explained at some length, although I still have a question. Subsection (1)(b also permits another statutory tribunal that Ministers can specify. The Minister alluded to the fact that there is some expectation that employment tribunals may participate, not least because they handle health and safety at work cases.

I have two separate but important questions. How significant a role does the Minister envisage for non-first-tier tribunals, which are alluded to in subsection (1)(b)? What estimate has his Department made of the costs of the appeals process and what budget has been put to one side for the first year, say, after the measure is launched?

Pat McFadden (Labour, Wolverhampton South East)

The hon. Gentleman’s first question relates to the proportion of cases dealt with by first-tier or other tribunals. The answer is that it depends on the jurisdiction. As I said, one of the advantages to business, regulators and everyone concerned is that hearing appeals through a tribunal can concentrate experience and work of that nature over time and build up expertise. However, when the jurisdiction is not dealt with by the first-tier tribunal but by an employment tribunal, the latter would deal with the process. Given that this is enabling legislation covering a significant degree of enactments, it is difficult for me to give the hon. Gentleman the percentages of first-tier and other tribunals. The answer to the question is that it will depend on the jurisdiction and the issue at heart; health and safety, for example, might be dealt with by other tribunals, other issues that we have talked about might not.

I may have to return to the hon. Gentleman with the answer to his question about the budgets that have been set aside. On costs, this is one of the parts of the Bill that I was referring to when I mentioned the impact assessment the other day. This part of the Bill is expected to give rise to the most significant savings to business. If memory serves me right, the savings on costs to business will be up to £80 million. In terms of the budget set aside to do the work, the answer may be shared between my Department and the Ministry of Justice, which is the lead Department for tribunals. I will come back to the hon. Gentleman on that, or write to him. I would prefer to do that rather than to give him a figure for the budget right now.

Clause 58

Pat McFadden (Labour, Wolverhampton South East)

The clause touches on an issue alluded to by my hon. Friend the Member for Glasgow, North the other day, so I thought that it might be worth setting out what we hope to achieve in the provision. My hon. Friend pointed out that the Procurator Fiscal Service and the Lord Advocate decide on prosecution matters in Scotland. The clause recognises that. It states:

“A Minister of the Crown must obtain the consent of the Lord Advocate before making an order under this Part in relation to an offence in Scotland.”

There are two issues involved: the legal issue and the devolution issue. I will deal with devolution first. Clause 56 is clear:

“An order under this Part may not, except for consequential purposes, make any provision which would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament.”

We are familiar with the concepts of devolved and reserved matters.

Clause 58 requires that a Minister proposing to make an order affecting the prosecution of any offence in Scotland must obtain the agreement of the Lord Advocate. The Lord Advocate is responsible for prosecution in Scotland and should therefore consent to the proposed changes. Giving regulators civil sanction powers would remove that decision from the Lord Advocate, so we thought that it was absolutely right to put the provision into the Bill.

Subsection (2) requires a Minister proposing to make an order affecting the powers of a regulator that is a local authority in Scotland to consult Scottish Ministers.

Ann McKechin (Labour, Glasgow North)

Where a local authority in Scotland becomes the primary authority for a company that operates in other parts of the United Kingdom, what would be the procedure if the primary authority wanted to enforce action in some other part of the United Kingdom? Would the relevant Minister still be required to take the authority of the Lord Advocate or a Minister of the Scottish Executive, who have no function outwith Scotland? Will my hon. Friend clarify the position?

Pat McFadden (Labour, Wolverhampton South East)

It is important to note the difference between subsections (1) and (2). Subsection (1) concerns the Lord Advocate and action in Scotland; subsection (2) concerns the powers of local authorities as regulators. The situation to which my hon. Friend refers already exists in some cases under the home authority principle. My hon. Friend the Member for Dundee, West is not with us this morning, but my understanding is that Dundee city council is a home authority that has four operations that operate throughout the UK. That situation is already provided for.

Under subsection (2), if a Minister proposes to make an order that affects the power of a regulator that is a local authority in Scotland, he would be required to consult Scottish Ministers, because they obviously have an interest in the function of local authorities in Scotland. For the avoidance of doubt, subsection (3) defines the term “local authority in Scotland”. We have set out the application of the Bill in terms of both reserved and devolved functions, but in this clause we also set out important procedural matters that respect the position of the Lord Advocate in Scotland.

Clause 60

Pat McFadden (Labour, Wolverhampton South East)

We have heard a significant amount about consultation in the debate, and it is an important part of the requirements of the Bill. The clause relates to other clauses that we have discussed or will come on to. Subsection (1) states:

“Before making an order under this Part the relevant authority must consult the following...the regulator to which the order relates...such organisations as appear to the relevant authority to be representative of persons substantially affected by the proposals”.

That could be a business group, which may represent a number of small businesses or other such persons. It is important that consultation is part of the machinery for which we are legislating, and there is a broad definition under subsections (1)(a) to (c) of who should be consulted. That will rightly ensure a high level of public scrutiny of the decision to award a regulator new sanctioning powers.

If there are substantial changes to any part of the proposals as a result of the consultation exercise, subsection (2) requires the Minister to undertake further consultation on the revised proposals, as he considers appropriate.

Mark Prisk (Conservative, Hertford and Stortford)

Clause 60 is important and the process of consultation is essential if sanctions are to work as part of the Bill. Subsections (1)(c) and (2) are particularly important in the context of consumers. Quite understandably, we have discussed the principal relationships between regulator and regulatee, but it is important to recognise a third significant group—consumers. The Minister is nodding.

It is extremely important to ensure that the interests of consumer organisations, such as the National Consumer Council or the Consumers Association—better known as Which?—are included in the process as those organisations do an excellent job of representing consumers’ interests. They represent the interests of many of our constituents, so it is extremely important that the measure is not simply confined to a narrow relationship between the regulator and regulated—I think that is probably better English than regulatee; it is important that the provision goes further than that. We welcome that addition to the clause.

Clause 62

Pat McFadden (Labour, Wolverhampton South East)

The clause extends the existing powers of the Minister to create criminal offences in secondary legislation under the powers to create alternative civil sanctions in this part of the Bill. It is important that clause 62 is read alongside the list of enactments in schedule 7. Subsection (4) limits the scope of the clause to the secondary legislation that can be made under the list of enactments in schedule 7. That means, for example, that a Minister creating, amending or consolidating criminal offences in secondary legislation made under one of those listed enactments may also provide for the offence to be sanctioned using the fixed monetary penalty.

Taken with clauses 36 to 38, and schedules 5 and 6, the clause will ensure that all relevant offences, whether created in primary or secondary legislation, can be dealt with through a civil sanction. That is important because it helps to ensure consistency across a particular regulatory regime.

The clause allows Ministers to confer only those powers in part 3. All the substantive restrictions will apply when the extended powers are used—for example, in relation to devolution.

Before making an order, the Minister must be satisfied that a regulator will exercise the powers in a manner that is in line with the principles of good regulation—the Committee will probably not want me to list them again. That is provided for in clause 66, to which we will come shortly.

Clause 62(3) provides that any order made under an enactment in schedule 7 giving the regulator access to the new civil sanctions will be subject to the affirmative procedure. That matches the parliamentary procedure for orders made under clause 36.

The clause is intended to ensure that the option that we are creating to use civil sanctions is available across primary and secondary legislation and across the regulatory regime.

Clause 63

Pat McFadden (Labour, Wolverhampton South East)

The clause is about guidance, and again the provisions are important. We are significantly changing the range of options available to regulators and the use of civil sanctions, and it is important that there is proper guidance on that.

The clause says that where the power to impose a civil sanction is conferred on a regulator

“the provision conferring the power must secure the results in subsection (2).”

That means that the regulator must publish guidance about its use of the sanction, that the guidance must contain the relevant information and that the regulator must revise it where appropriate, consult such persons as the provision may specify and have regard to the guidance or revised guidance in exercising its function.

On what we might call the penalty guidance, subsections (3) to (5) set out the specific requirements that the guidance must meet in relation to fixed penalties, discretionary requirements and stop notices. For example, regulators will be required to include details of how the penalties will be imposed and of those matters likely to be taken into consideration in determining the level of a variable monetary penalty.

We have talked about the powers and the need for consultation in putting together an order to confer them, but guidance on how those powers are to operate in practice is an equally important part of the regime, and that is covered in clause 63.

Mark Prisk (Conservative, Hertford and Stortford)

As the Minister said, clauses 63 and 64—I am looking principally at clause 63—refer to what should be in the guidance. I have two brief questions for the Minister. First, when would the guidance be published? It is always important for businesses to understand that. Secondly, how is it to be made accessible to affected persons? The provisions will affect a wide section of the business community, so it is important to understand how the Government intend to ensure that business is properly informed in a timely way.

Pat McFadden (Labour, Wolverhampton South East)

The answer to the hon. Gentleman’s question about when the guidance will be published is that we have codes on such things. Our intention would be to publish guidance 12 weeks before the proposals came into effect. That should give people adequate warning of what is involved.

More generally, the hon. Gentleman is right to say that guidance is important. Sometimes businesses pay outside consultants to help them to comply with regulation or a change introduced by the Government. Obviously, we recognise that that happens, but we do not want businesses to do it unless they have to, so we put significant effort into improving guidance.

Let me give an example. The Government have put significant effort into improving the “Employing people” pages of the Business Link website. They are a very good guide for businesses so that they do not have to spend what are sometimes significant sums asking people how they should comply with the law when that information could be made available for free and, we hope, in an accessible and user-friendly way by the Government. The hon. Gentleman is therefore right to stress the importance of guidance, and we do put effort into improving it. We envisage such guidance being available on a regulator’s website, so that a business in that field could check what was expected of it. That is right and fair, and that is what we hope that regulators would do under this provision.

Clause 65

David Kidney (Labour, Stafford)

It is a pleasure to serve under your firm but fair direction of our proceedings, Mr. Chope. I have some questions for my hon. Friend the Minister. The clause relates to the publication of information on enforcement action in respect of the new civil sanctions. What is the purpose behind the clause? It strikes me that it is one of two things. One possible explanation is that it constitutes a name-and-shame policy for people on whom civil sanctions are imposed. The second explanation is that it is about accountability: people who impose the new civil sanctions have to account for how many they have imposed and whether they are collecting moneys efficiently, so that there is information on which the public can judge them. To me, the second explanation is far more satisfactory.

The reason why I thought that the first explanation might apply is that this morning I woke up to the news that from today the Border and Immigration Agency will, under a naming-and-shaming policy, publish the names of employers who employ illegal immigrants. It therefore occurred to me that the Minister might say that that is his purpose in this case.

The important point about the second purpose—collecting the information and knowing whether the system is effective—is that under subsection (2) some information has to be published, but it is partial. The information that a civil sanction has been imposed should be collected, but not necessarily the information that the matter has come to a successful conclusion. Under subsection (2)(b), for some of the fixed monetary penalty cases, it will be reported that the penalties have been paid, but that will not necessarily happen for all of them. That is my reading of the provision. It is therefore possible that we would never know the true extent of the power and whether it was successful. I conclude that we might never know its effectiveness if we were thinking back to the time when magistrates courts were imposing many fines but apparently not collecting them successfully. The collection rate was appalling. That fact would be very important for public interest in whether the sanctions were any use. However, because of the way in which the clause is drawn, I do not think that we would have that information.

The provision also seems incomplete because of subsection (3), which states that if there is a successful appeal against a civil sanction, that information does not have to be collected and reported. If one is asking about the effectiveness of the overall system, one has to ask why that is, because it is a relevant fact that in many cases there would be a successful appeal against the civil sanction. We would want to know that fact, and it should be published, because it would lead to questions being asked about the alacrity with which civil sanctions were being imposed but overturned on appeal. It would be important to have that information; it should not be excluded.

Subsection (4) is the most worrying of all. It says that the information need not be collected and published

“where the relevant authority considers that it would be inappropriate to do so.”

That sounds as though a local authority, as a regulator, could decide not to collect information because it was inappropriate to do so or to collect some information about some cases but not others, which would lead to an undermining of the use of the statistical evidence. That seems to hole the entire clause below the waterline. I looked at the explanatory notes for guidance, but found that they muddied the waters even further instead of solving the problem.

Paragraph 170 reminds us that the reports may not need to list certain cases. “Certain cases” suggest that it is one or two and not the whole lot, but the clause is so broadly drawn that the regulator could decide that all the cases were inappropriate to be publicised. The clause says that cases need not be listed

“where the Minister thinks it inappropriate for such cases to be publicised, for example, for data protection reasons.”

If I am right and the purpose is to compile statistical information, data protection would not apply because we would not be disclosing information about individual cases.

Why do the explanatory notes mention the Minister? The Bill says that the “relevant authority” makes the decision. Either the Bill or the explanatory notes is wrong. The Minister needs to tell us the purpose of the clause—he was about to rise to do so before I interrupted him, so I apologise for that—and whether he is satisfied that the Bill has been drawn sufficiently carefully on this occasion.

Pat McFadden (Labour, Wolverhampton South East)

I am extremely grateful to my hon. Friend for asking me that series of questions, which will allow me to elucidate on the rationale behind the clause. Hopefully, I can give him some answers. He asked several questions, including whether the purpose of the clause was accountability or letting the public know who had contravened. It is a bit of both. It is right that regulators, who are being given a significant new sweep of powers under this part of the Bill, publish information about how they are exercising those powers. That is a good in itself. As to naming and shaming, there can also be a public interest in knowing whether an organisation has contravened and has reached the end of the process. We can go back to the example of a business releasing toxic waste into the environment. I do not know why the public should not know about a business that has been found guilty of such an offence, has received a civil sanction—it may have appealed but has not been successful—and has reached the end of the process.

My hon. Friend then asked, why exempt those on appeal? That issue has arisen in other Bills as well. Is it in the public interest to know when charges have been levied but the person has not been found guilty in the end? There is a reputational issue at stake for business. We have talked about appeal processes in the context of the Bill. The regulator may impose a civil penalty, but the penalty gets overturned on appeal because the regulator was wrong. In those circumstances, is it fair for the business to be named in the report? In the end, when the process has been completed, the business has not been found guilty of anything. Therefore, subsection (3) is fair.

David Kidney (Labour, Stafford)

I guessed that my hon. Friend might say that it was a bit of both, but does he not think that that is confusing? If there were lots of civil sanctions being imposed and they were all being overturned on appeal, there would be a cause for public concern. If the Bill exempts publication of information about cases because they were successfully appealed, we would not know about that concern.

Pat McFadden (Labour, Wolverhampton South East)

My concern is with reputational fairness for the business. I do not think that saying that it is a bit of both is a bad thing. There is a perfectly fair dual purpose to publishing information. It will show those looking at the regulator how the regulator is using the new suite of powers, and it will serve the public interest to know about those who have contravened the regulations. That can be fair, provided it has reached the end of the process.

The point that my hon. Friend is making is, in a sense, a generic one. It has been raised in other situations. My Department has sometimes been asked, “Shouldn’t those accused of something be named on some list, even if it isn’t proven?” I am not sure that that is fair. Subsection (3) is intended to deal with that situation.

My hon. Friend’s final question concerns subsection (4) and the phrase,

“where the relevant authority considers that it would be inappropriate to do so”.

I should make it clear that the relevant authority and the Minister are the same thing under that provision. The relevant authority will not be the regulator. Subsection (4) will allow the Minister to exempt certain cases from the publicity requirement, and is intended to capture cases that may have data protection implications or other grounds for exemption.

I must be careful how I put that. What other grounds might there be for exemption from the requirement to publish information about enforcement action? The regulated person or business may be in a particularly sensitive area. It may be that if information about the address of the premises came into the public domain, it could be a danger to those working there. I know that we can think of examples where that might be the case. There are some among the population who object fiercely to some business activities, research activities and so on, so it is prudent to give the Minister the power to say in those circumstances, “We don’t want that information released, because we could be putting someone at risk by publishing it.”

David Kidney (Labour, Stafford)

I apologise for missing the fact that the relevant authority is the Minister; my hon. Friend is quite right. In the kind of case that he described, it is perfectly understandable that a Minister might want to direct that such information should not be published—certainly information such as people’s names, addresses and so on. Does my hon. Friend agree that that would happen in exceptional situations rather than simply inappropriate ones? Will he reflect that “inappropriate” is quite a wide test for the power, and that something such as “exceptional circumstances” would be more narrowly focused?

Pat McFadden (Labour, Wolverhampton South East)

We could have a discussion about “exceptional” and “inappropriate”. We agree that regulators should not be exempted from the duty for frivolous reasons. “Exceptional circumstances” might take it too far. It could cause a regulator difficulties in cases where strong data protection reasons exist for not disclosing enforcement action but the case is not seen as exceptional. We could argue about the specific term, but on data protection grounds and grounds of safety for those involved in the enterprise, we think that the provision in subsection (4) is a prudent part of the Bill’s information release function.

Mark Prisk (Conservative, Hertford and Stortford)

This has been a useful debate. The hon. Member for Stafford rightly raised questions, which the Minister has delicately answered, about inappropriateness. I do not wish to stretch it too far, but does the Minister agree that although it might be helpful if the word “inappropriate” remained in the Bill, it would also be helpful if it were understood that it is the Government’s expectation that the matter would not be regarded as routine?

Pat McFadden (Labour, Wolverhampton South East)

That is a perfectly fair point.

Clause 66

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 45, in clause 66, page 32, line 6, at end add—

‘(2) Where the regulator is a local authority or authorities, prior to the provision being made the relevant authority shall consult the LBRO as to whether the authority or authorities are fully compliant with the said principles and will continue to act in accordance with those principles.

(3) Notwithstanding subsection (2), the relevant authority may proceed to make the provision in subsection (1) with the condition that the LBRO is satisfied that any authority that is not fully compliant will become fully compliant within one year of the provision being made.’.

Christopher Chope (Conservative, Christchurch)

With this it will be convenient to discuss new clause 3—Duty to secure observance of Code of Practice—

‘Where any local authority has been granted powers under Part 3 of this Act, the LBRO shall have the duty or reviewing and, if appropriate, certifying every three years whether local authorities are compliant with the provisions of any Code issued under Section 22 of the Legislative and Regulatory Reform Act 2006.’.

Mark Prisk (Conservative, Hertford and Stortford)

I want the new clause to be regarded as a distinct element. If the Minister embraces both proposals warmly, the matter will be resolved, but if not, we may wish to press them to a Division. It would be appropriate to hear his response, but we might wish to deal with new clause 3 separately.

Amendment No. 45 would insert two subsections into the clause. It relates to local authorities, and it would reinforce the need for all regulators to be fully compliant with the Hampton principles. We have debated them, so I shall not rehearse them now. The amendment stems, as does new clause 3, from worries that have been expressed by business. I am particularly grateful to the British Retail Consortium for bringing the issue to my attention. It is worried that this part of the Bill does not explicitly state roots in the Hampton principles, and it wants consistency in the compliance of regulations with those principles. It says that not only when regulators begin their process should they be seen to be compliant, but that there should be a process by which that is made consistent throughout their operation.

The amendment would provide the Government with a compromise. It would allow the powers to proceed as the clause envisages, even if some authorities are not currently compliant. It would give the Local Better Regulation Office a role to ensure that such authorities become compliant in a year. It would make sure of the opportunity to achieve Hampton compliance. We can all think of local authorities that may achieve that at a particular point, but we believe in the principles and want the whole system to be skewed towards ensuring that the maximum number of authorities are compliant, and thus able to participate.

New clause 3 would ensure that other regulators who can use the administrative penalties are also consistently compliant with the Hampton principles. As the Minister knows, the Macrory report was clear that the use of administrative penalties should only be for regulators who are consistently compliant. As drafted, the Bill does not seem to secure ongoing compliance. It requires an assessment prior to the first allocation of the powers, but not thereafter. It may well be that with the vast range of resources behind him, the hon. Gentleman can identify the fact that such a provision is embedded in another part of the Bill. Unless he can show that a consistent compliance provision exists, the new clause would strengthen the Bill’s Hampton credentials. Consistency is just as important as being compliant at the beginning, so if I may I shall move the amendment and new clause 3.

Christopher Chope (Conservative, Christchurch)

We shall come to new clause 3 formally later, but we can debate the two provisions together now.

Lorely Burt (Liberal Democrat, Solihull)

I agree with the sentiment behind the new clause. So many companies will feel frustration if they are encumbered with a local authority that is not working within the spirit and the law of the Hampton principles. The new clause would give the LBRO auditing powers to see that local authorities comply with the Hampton principles and the ability to certify them as compliant every three years. I should be grateful if the Minister would elucidate on whether such matters are catered for elsewhere in the Bill or whether the proposal would introduce something new that would be helpful.

Christopher Chope (Conservative, Christchurch)

I remind the Committee that with this we are discussing New clause 3—Duty to secure observance of Code of Practice—

‘Where any local authority has been granted powers under Part 3 of this Act, the LBRO shall have the duty or reviewing and, if appropriate, certifying every three years whether local authorities are compliant with the provisions of any Code issued under Section 22 of the Legislative and Regulatory Reform Act 2006.’.

Lorely Burt (Liberal Democrat, Solihull)

I was mid-sentence before we broke for lunch, Mr. Chope. We were talking about new clause 3, and I was asking whether it would be helpful, when you quite rightly said, “Order, order”. I was going to ask whether it would be helpful in ensuring that local authorities comply with the Hampton principles and continue to comply with them where they have had a track record of non-compliance.

Pat McFadden (Labour, Wolverhampton South East)

The hon. Member for Hertford and Stortford said that I might, in responding to the debate, end up pointing him to another part of the Bill that covered some of the issues before us, and he is correct. I point him to clause 60(1)(c), which says that the relevant authority—as we have said, that will be a Minister—must consult

“such other persons as the relevant authority considers appropriate.”

I also point him to the guide to the Bill, which we have published and distributed. Page 28 says:

“For local authority regulators the Government will look to LBRO for advice on whether, in a particular regulatory field, local authorities in general are Hampton compliant.”

We have therefore drawn attention to the issue not only under the general duty on consultation elsewhere in the Bill, but in the guide, and that covers one part of what the amendment is intended to do. As the guide makes clear, a Minister who intends to award the new sanctioning powers will look to the Local Better Regulation Office for advice.

I want, however, to raise a point about the second part of the amendment. Clause 66 says that a Minister can award the powers in the Bill to regulators if he or she is satisfied that the regulator will exercise them in accordance with the principles of good regulation, which we have discussed several times. However, new subsection (3) in amendment No. 45 could give local authorities a year’s grace, in that they could use the sanctions without complying with the principles of good regulation until the end of that year.

The Government would have a problem with that because authorities that are not Hampton-compliant could be given the powers in the Bill on the basis of a projection that they might be compliant some time in the next year. There is also the question of what would happen in a year’s time if that judgment proved not to be well-founded. Authorities could have been exercising the powers for a year but might still not be Hampton-compliant. That could create a difficulty. Would the powers automatically lapse? The amendment is silent on that. That could create some uncertainty for regulators and business.

I am slightly surprised by new clause 3 because it would vastly expand LBRO’s functions. As we have discussed, LBRO will have a relatively modest budget and be relatively modest in size. The new clause would ask LBRO to review all 450 or so local authorities every three years. That would be a significant undertaking and would require a big increase in resources, but there is another reason why it goes against the grain of where we are trying to go with regulatory principles. We discussed risk-based approaches to regulation the other day, and we also know that within local authorities—but not only local authorities—there are concerns about the amount of routine, tick-box audit and inspection. A requirement that is not risk-based but includes all local authorities, every three years, would be pulling in a different direction from where we are going more generally with audit and inspection policy.

Clause 67 requires the Minister who makes the order that gives local authorities and other regulators access to the new powers to undertake a one-off, post-implementation review three years after it comes into effect. That is sensible. A measure that made that happen to every local authority every three years would be going too far. For those reasons, we do not want to accept new clause 3.

On the review mechanism in the Bill, the Minister would have to consult such persons as he considers appropriate. When local authorities have been given the powers, the Minister would be expected to consult LBRO. There is also an issue with a different requirement on the compliance code from elsewhere in the Bill. Local authorities will have to “have regard to” the compliance code when carrying out their enforcement activity, including the use of part 3 powers. However, new clause 3 would mean that

“local authorities are compliant with the provisions of any Code”.

We spoke about conflicting requirements on local authorities when we spoke to a previous amendment. “Have regard to” is the amendment that is set down on the compliance code. There are a few grounds on which I hope new clause 3 and amendment No. 45 are not pressed to a Division.

I accept that the hon. Member for Hertford and Stortford is trying to keep those things under review, but the proposals might be only a blunt instrument in that regard and, as I said, they would pull us away from the more risk-based approach that we are pursuing.

Mark Prisk (Conservative, Hertford and Stortford)

It has been a useful debate. Amendment No. 45 was not entirely dealt with in the Minister’s response. He said that part of the guidance that comes with the Bill talks about compliance in general. However, we are not concerned with the general but specifically with the local authority and whether it is truly compliant with the principles on which the Bill is based. I am therefore not entirely convinced by what the Minister said.

I recognise and accept that amendment No. 45 would be unduly burdensome as a regulatory cost. I shall come back to that in a moment.

On new clause 3, when we go back to the Macrory principles—I was reading them again yesterday to clarify them in my own mind—we will see that there is a good argument for saying that if we are going to have an established set of principles on how regulators operate, it is important to ensure that they operate on a consistent basis and not just on a snapshot. There is an entirely legitimate argument that the new clause would give the LBRO a significant and increased function to perform, but that does not outweigh the importance of ensuring that the local regulatory bodies are consistently compliant, and that they therefore fit with what Macrory says. After all, we are talking about a three-year period, and as we know, local authorities vary in their performance over a year, let alone three. We are simply seeking to ensure that the LBRO has the ability to investigate. How it seeks to do so—perhaps by a detailed inspection—is not specified; rather, it would give the LBRO the opportunity to ensure that authorities are consistently compliant.

Pat McFadden (Labour, Wolverhampton South East)

May I clarify something that the hon. Gentleman said? We are not talking about specific local authorities, but the capacity of local authorities in general to exercise powers in a regulatory field. We do not want some local authorities to be able to exercise them, and others not. I hope that he takes the point about the difference between local authorities exercising the powers in a regulatory field—for example, trading standards—and individual councils in different parts of the country.

Mark Prisk (Conservative, Hertford and Stortford)

That is entirely reasonable. I think that the Minister has highlighted the Government’s intentions. At the beginning of the debate, I said that I wanted to deal with the amendment and new clause 3 separately. If acceptable, I shall withdraw the amendment and, at the appropriate moment, press the new clause to a Division. I beg to ask leave to withdraw the amendment.

Clause 67

Mark Prisk (Conservative, Hertford and Stortford)

I welcome the clause. The Minister referred to the fact that after three years there will be a review, which my party, in another place, was able to establish as a very important part of what will be a new regulatory environment. It is important to put that on the record. In particular, it is worth the Committee noting that there is not only a three-year review period, but a requirement to publish the outcome and lay it before the House. We welcome those important aspects of the Bill.

Clause 68

Pat McFadden (Labour, Wolverhampton South East)

The clause provides that where a Minister has made an order conferring sanctioning powers on a regulator, they may direct it not to impose further sanctions. Subsection (2) provides that the Minister may take such action only if there is evidence that the regulator has failed

“on more than one occasion”—

an important point—to comply with a duty imposed on it. We are not trying to set up a new regulatory regime, as the hon. Member for Hertford and Stortford just said in relation to the previous clause, that could simply be withdrawn if there is a failure on just one occasion. There is a tone of persistence about the suspension clause that I want to impress on the Committee.

The clause provides, therefore, that such a direction could be made only where there is evidence that the regulator has failed more than once to comply with a duty imposed on it under part 3 of the Bill, or to act in accordance with its penalty guidance, enforcement policy or relevant principles of regulatory best practice. Subsection (3) provides that a Minister may revoke a direction suspending a regulator’s sanctioning powers

“if satisfied that the regulator has taken the appropriate steps to remedy the failure”.

Furthermore, the clause ensures transparency, and subsection (4) requires the Minister to consult before making a direction to suspend the powers or revoke such a direction. As the hon. Gentleman said earlier, the Bill allows regulators access to a range of important new powers. We talked this morning about stop notices, which could be particularly significant. Businesses and others subject to the powers in the Bill need assurances that regulators will use the sanctioning powers responsibly and consistently. The clause contains safeguards, therefore, by providing for a power to suspend their use, if that is not the case.

Clause 69

Pat McFadden (Labour, Wolverhampton South East)

The clause is about the payment of penalties. Again, we touch on previous debates; we have often mentioned the analogy of parking, imperfect though it is. The accusation is sometimes made that parking fines are used as a revenue-raising mechanism. The clause makes it clear that money received through the issue of a fixed or variable penalty, including late payments or interest charges, must be paid into the relevant Consolidated Fund. Subsection (2) defines those funds.

Professor Macrory recommended that there should be no perverse financial incentive for regulators to favour a particular sanction. In our discussions about the various new powers available to regulators under the Bill, I have said several times that we are trying to avoid perverse incentives to use one route rather than another. The payment of penalties into the Consolidated Fund is important. The clause ensures that and acts as a safeguard against the kind of incentives that we want to avoid.

Clause 70

Mark Prisk (Conservative, Hertford and Stortford)

I wonder whether I might test the Minister. I allude to a debate initiated by the hon. Member for Stafford. How confident is the Minister that the clause is secure from legal challenge? I think not only of the Data Protection Act 1998 or the Regulation of Investigatory Powers Act 2000 but of human rights legislation. I know that Ministers always have to sign such things off, and it would be helpful to know how confident he is about that.

Would he also tell us how confident the public can be that the disclosure of information by the criminal justice system to the regulators enabled under the clause will at all times be appropriate, confidential and secure? We are all aware of recent mishaps with various forms of data—I am sure that the Minister has his laptop firmly attached, unlike a Cabinet Minister recently. The loss of 25 million benefit records and the dreadful and unfortunate errors with other data concern people, so it is important that the public can be confident that these matters will be handled in an appropriate and confidential way.

Pat McFadden (Labour, Wolverhampton South East)

This is a gateway clause that allows the passing of information from the criminal justice system to regulators. It is necessary because those who work in the criminal justice system may come across breaches that are properly dealt with by the kind of civil penalties provided for under the Bill. The clause allows them to pass information about those breaches or potential breaches to the relevant regulator. Such gateway clauses are not unprecedented. For example, the Enterprise Act 2002 has a similar provision. When making an order under part 3, the Minister concerned will assess the situation to ensure, as far as is possible in the circumstances, that it is compliant with the European convention on human rights.

If it helps the Committee, I have some more facts about the clause. Information may be disclosed only if the regulator has an enforcement function in relation to a criminal offence, and for the purposes of the regulator exercising one of the new powers. Subsection (2) provides that the information that can be disclosed could include information collected before this provision comes into force. Subsection (3) provides that disclosure of information is

“not to be taken to breach any restriction of information”.

However, subsection (4) does not authorise the sharing of information in contravention of the Data Protection Act 1998 or part 1 of the Regulation of Investigatory Powers Act 2000. The hon. Gentleman is right to say that one must be careful with any clause that mentions information sharing and the public have legitimate concerns in that area.

Equally, it is also in the public’s interest for breaches of the law in the regulatory field to be properly investigated. If we relate the clause to the wider purpose of the Bill and part 3 in particular, that purpose is to give regulators a new suite of powers in order to regulate more effectively than they can at present with the one-club option of criminal prosecution. It seems correct to allow for the passing of information from the people concerned with one route, the criminal justice system, to those who, by virtue of the Bill, will be responsible for enforcing the new civil penalties. Information powers should always be treated with care, but clause 70 gives the regulatory system an advantage in ensuring that where there are breaches, the information goes to those who are responsible for enforcing the law and gives them the information necessary to do so.

Clause 72

Pat McFadden (Labour, Wolverhampton South East)

The clause brings us to part 4 of the Bill. To use a lay term, I would summarise part 4 by saying that it is related to an aspect of the job description of regulators. This part of the Bill was significantly improved as a result of discussion and amendment in the other place and it gives us two important clauses, beginning with clause 72. I am sure that we would all agree that part of the job description of regulators—not the whole of it—should be, as the clause states, that they exercise their functions in a manner that does not impose unnecessary burdens or maintain burdens that the regulator considers to have become unnecessary. The point about the regulator making the judgment is one of the changes that have been made as we have moved along the line in debating the clause.

In overview, the clause is about helping to ensure that regulators do not impose or maintain unnecessary burdens. Subsection (2) provides that where the duty has been imposed, unnecessary burdens need not be removed where it would be impracticable or disproportionate to do so. The sense of proportion is important because it is something that has been added. We could find a situation where a burden had been identified by a regulator as being unnecessary but the act of removing it would be completely disproportionate to the burden that it was placing on the regulated bodies. Subsection (2) allows that question of proportion to be taken into account.

In following this duty, the Government do not intend that regulators should divert resources from their core functions in a way that compromises their effectiveness. As I said, this is part of the job description of regulators; it is not in any sense the whole job description. In considering unnecessary burdens, we expect that regulators should be able to target their resources more effectively, therefore enhancing regulatory outcomes. Subsections (3) to (6) require a regulator to whom the duty has been applied to publish a statement as soon as is reasonably practicable, setting out what they propose to do in the following 12 months. Statements must then be published annually, so the clause asks regulators to keep a constant eye on the question of unnecessary burdens. That is important because in the regulatory field we often talk about the need for a culture change, and the provision whereby the issue will be considered annually is intended to embed that approach.

Mark Prisk (Conservative, Hertford and Stortford)

In the light of the duty and the knowledge that the Government intend to establish regulatory budgets, how does the Minister see the two policies interweaving? I can see a connection, but it would be helpful to understand how that will work. There is a new duty not to have unnecessary burdens, and he has just spoken about wanting to encourage regulators to use their resources appropriately. How does that fit into a regulatory budget environment?

Pat McFadden (Labour, Wolverhampton South East)

The hon. Gentleman is right to suggest that regulatory budgets are much discussed and have significant potential in this field. They will focus people’s minds not only on what is coming in, but on what could be taken out. I think that that would help in a regulatory budget environment, because there would be a duty on regulators constantly to have an eye on the stock, as it were, as well as the flow. I do not see a contradiction between the two elements; in fact, I think that they go well together.

The power is an important addition to the suite of provisions that are designed to embed this agenda within the group of regulators operating in this country. I stress that it is not new or unheard of; it is similar to the duty in the Communications Act 2003 that requires Ofcom to keep its functions under review, with a view to ensuring that unnecessary burdens are not imposed or maintained.

The clause also provides an avenue for implementing the recommendation by the House of Lords Select Committee on Regulators in its recent report, “UK Economic Regulators”, that

“economic regulators be statutorily required to facilitate the competitiveness of UK firms by...removing regulatory burdens from firms wherever possible.”

The clause is in line with that recommendation.

Mark Prisk (Conservative, Hertford and Stortford)

I welcome the Minister’s remarks. Indeed, I welcome what is in effect a new duty to keep the regulatory function under review and for regulators of the various hues that we have been considering under this legislation not to impose an unnecessary regulatory burden. It is fair to say that the clause has changed quite remarkably from the original drafts that I saw in early forms of the Bill that were considered in the other place. I commend the other place for the work that it did.

I also welcome the recognition of the need to remove such burdens, which is noted in subsection (2). However, I note that the regulator, whoever that may be in any circumstance, will still be left to decide, first, what is or is not, in their view, burdensome, and secondly, whether its removal would be impracticable or disproportionate. The requirement to publish an explanatory statement is fine in itself, but I am disappointed that notably lacking is a clear statement, a requirement—I did not hear this in the Minister’s remarks—for direct consultation and/or involvement of business in determining whether a regulatory burden is unnecessary.

This is a missed opportunity, if I may say so. I hope that the Minister will correct that in replying to the debate. I suspect that to rely on regulators regulating themselves is not likely to deliver the significant change that we would all like in this area. Understandably, given the general circumstances politically, Ministers are talking a great deal about wanting to listen to business and to reduce the regulatory burden—heaven knows, with the state of the economy, that is long overdue—yet they have missed this opportunity to do so. Often it is the regulated, not the regulator, who is best able to judge what is an unnecessary or disproportionate burden. The Minister will probably retort that, by using the Hampton principles, here embedded in the Bill, the regulators will be able to make that assessment. However, to fail to enable business to affect the decisions is a serious omission.

I am particularly concerned for small businesses. Both sides of the House agree that regulations have a disproportionate impact on the smallest businesses. The Federation of Small Businesses tells us that the average small business spends seven hours a week complying with Government red tape and regulation. Given that there are 4.4 million small businesses in the UK, that is an extraordinary waste of what could be highly productive time.

Judy Mallaber (Labour, Amber Valley)

Does the hon. Gentleman agree that if we consult businesses, which is what I think he is suggesting, we have to be careful that the business does not put forward as unnecessary regulation something that is a regulation for a good purpose? Something that may seem a burden on a business could have a proper protective or administrative purpose. I have difficulty seeing why we should just leave it to that business. We must also be careful that we do not start to put too much burden of regulation on the regulator, otherwise we will find ourselves with mirrors on mirrors—potentially more administrative burdens.

Mark Prisk (Conservative, Hertford and Stortford)

I understand the hon. Lady’s point. She is right that it would not be appropriate for the regulated to decide what regulations there should be. My concern is that the regulated, rather than the regulator, should be able to be involved—indeed, expressly—in looking at where the problems are. They should be able to say, “We are having a real problem with this particular regulation.” It should be expressly stated. That, I think, is the omission.

The hon. Lady is right that the decision must inevitably rest with the regulator. My concern is about the omission of an explicit mechanism or trigger to ensure that business understands that it has a part to play in an important duty being put forward by the Government. Perhaps such a provision will be set out in response to the debate, in the statements that the Minister may be writing as we speak. Can he tell us what consideration he and his officials have given to the inclusion in the clause of a provision that the regulators should respond to business concerns about regulation? What considerations have they made? Has the Minister held any meetings with the business community, to discuss the clause and how business might aid the process of rooting out unnecessary burdens?

Members of the Committee will be familiar—I know you are, Mr. Chope—with the British Chambers of Commerce burdens barometer. We could debate the strengths and weaknesses of any methodology of judging, but the British Chambers of Commerce is well placed to do so.

Judy Mallaber (Labour, Amber Valley)

Does the hon. Gentleman accept that many people think that the business barometer is absolute nonsense and makes no sense whatever? That view was expressed to the Regulatory Reform Committee, of which I am a member, by many organisations. The barometer is not a tool that has a great deal of respect.

Mark Prisk (Conservative, Hertford and Stortford)

I am sure that is the hon. Lady’s view, but I suspect that it is not the view of the British Chambers of Commerce. It is not my view. It is important that we have a clear, itemised list of what the burden of regulation is. The barometer has shown that the burden of regulation has increased by £65 billion over the past 11 years— £10 billion in the past 12 months—so there is clearly a problem. We can argue over one item or another, but the principle is the same.

To conclude, why does the clause not reflect the clear interest and concerns of business? Why is there no guidance from the Minister to show that business can participate, and is welcome to do so, in trying to identify unnecessary burdens of regulation? I hope that his response will lift the cloud of uncertainty and demonstrate that business has a part to play. I look forward with eager anticipation to his remarks.

Lorely Burt (Liberal Democrat, Solihull)

I find part 4 somewhat confusing. It was not originally part of the Bill, and seems to have been tagged on at the end without any consultation—indeed, after the consultation period. I wonder if that is reflected in some of the potential for duplication we have seen. Although I accept that it is vital that not one unnecessary burden is imposed on business, I am almost tempted to wonder why this part is necessary. What is it saying that is not implied or embedded elsewhere in the Bill? Is the duty not to impose unnecessary regulatory burdens so good and so important that—a bit like “New York, New York”—it has to be said twice?

In relation to the comments of the hon. Member for Hertford and Stortford about mechanisms and how the system would work, other than what exists, what would this part of the Bill impose on LBROs or others to fulfil the requirement not to impose unnecessary regulatory burdens? The Government have set the target of a 25 per cent. reduction in unnecessary burdens by 2012, but they have achieved only 6 per cent. so far, so I am sure that additional help would be extremely welcome. However, what do these provisions bring to the Bill?

Pat McFadden (Labour, Wolverhampton South East)

The hon. Member for Hertford and Stortford asked about a few matters on which I hope to give him some satisfaction. He asked about business input into the level of burdens or whether burdens can be removed. As the hon. Member for Solihull said, the Government have a specific target to meet.

I shall come to the burdens barometer of the British Chambers of Commerce in a moment, but to rewind on the Government’s position, several years ago, we set about the task of measuring the administrative burden on UK business and setting a target to reduce it. The job description for regulators has become part of the job description for Whitehall Departments. Each year, simplification plans are produced. The hon. Lady referred to them and I confirm that so far we are on track to meet them, although I cannot predict the future with certainty—no one can. However, the plans involve a serious exercise that has focused minds in Whitehall. We talked a moment ago about regulatory budgets. The duty is not a regulatory budget, but it is related in the sense that it asks Departments to think about the overall impact of what they do and the stock that is focused on, and to find ways of simplifying and easing matters for business.

The hon. Member for Hertford and Stortford asked about business input. I refer him and other hon. Members to the website, www.betterregulation.gov.uk. If he or a business feel that a particular regulation has become outdated or unnecessary, they can ask for it to be looked at to see if it can be removed. That action would not be giving the business a promise that the regulation would disappear like a puff of smoke, but it would force the Department to consider the matter. There is certainly capacity in the overall regulatory set-up for business voices to be heard.

Mark Prisk (Conservative, Hertford and Stortford)

There may indeed be existing channels, but there is no requirement related to the clause by which the regulators shall specifically talk to or involve the business community. Can the Minister confirm that?

Pat McFadden (Labour, Wolverhampton South East)

At the end, the clause confirms that the regulator will carry out that judgment. We have covered a couple of times in our debates on the Bill the matter of whether it can be entirely down to the regulated to make that judgment. I am sure that, as part of the annual process that we are setting out in the clause, any sensible regulator will discuss the regulatory burdens with those on whom those burdens are imposed. If a business feels that a regulator is interpreting policies in a way that imposes unnecessary burdens, it is entitled to raise the matter with the regulator. An annual review will help to promote that kind of dialogue between regulators and business. However, I do not see a need to write that into the legislation: I think the review will result in that.

However, I want to take the hon. Gentleman up on the British Chambers of Commerce survey, which has been cited a lot in our debates. We have not had too much party divide during our deliberations on the Bill, but the Government would see some of the things that have been cited as burdens in the BCC list not as burdens but as marks of a civilised society and an economy with proper rules. Instances in the list refer to disabled access to public transport, but I do not see that as a burden on business.

Judy Mallaber (Labour, Amber Valley)

Does my hon. Friend agree that the problem with the barometer is that it mixes up a burden with a legitimate policy objective that can be discussed and argued about? It does not confine itself to genuinely administrative areas, such as when one of the objectives is not being implemented in the most sensible way to avoid a burden on business. For example, an objective could require someone to fill out three forms, when one or none would do. That is what the barometer should be identifying, as is the case with a number of the European countries that the Regulatory Reform Committee visited within the last couple of weeks.

Pat McFadden (Labour, Wolverhampton South East)

My hon. Friend is absolutely right. There is a completely legitimate discussion to be had, and a legitimate case to be made, about the administrative burdens of the total sum of regulation. However, given the way that the Government have set up their review, that would be a separate discussion from policy outcomes. My hon. Friend’s description of the BCC list is absolutely right, because it mixes up the two things. We can probably all have an argument about one person’s burden being another person’s legitimate policy outcome, but in my view that is the weakness in the BCC list.

What do we mean when we talk about unnecessary burdens? They are burdens that are disproportionate to the regulator’s policy objective; in other words, they go further than is necessary to achieve the objective. They are targeted at situations where action is not required to achieve that objective, or are imposed in circumstances in which it would be possible to achieve the outcome in a less burdensome way.

We are not trying to set up a duty that interferes with the operational independence of the regulators; we are talking about the way in which they carry out those functions. That is why part 4 is a useful part of the Bill.

Mr. Priskrose—

Pat McFadden (Labour, Wolverhampton South East)

I was about to sit down, but I am happy to give way.

Mark Prisk (Conservative, Hertford and Stortford)

I shall intervene only briefly, and I will not stretch your patience, Mr. Chope, with an in-depth exposition of the British Chambers of Commerce barometer, except to say—in response to the Minister’s comment—that where a cost is incurred on, for example, the pay roll of a business, it is legitimate for that to be noted as a cost, however legitimate the policy may be.

My question to the Minister goes to the heart of the debate. If it is not explicit in the clause, will he join me in urging business that where they identify unnecessary burdens, with this new duty in place, they should make their concerns directly known to the regulators involved, so that there can be a genuine partnership in the process? Does he share that view? Will he join me in making that encouragement to the business community?

Pat McFadden (Labour, Wolverhampton South East)

Let me put it in my own way. First, there are existing avenues, as I have discussed, as well as a serious Government process to reduce administrative burdens, in which business has a completely legitimate voice. Secondly, the duty in clause 72 for an annual review of unnecessary burdens will entail regulators discussing those burdens with business.

Clause 73

Pat McFadden (Labour, Wolverhampton South East)

If clause 72 is about regulators’ job description, clause 73 is about their functions and the particular regulators to which the duty will apply. It has been said by some that a ministerial order made under powers conferred in clause 73 could interfere with regulators’ independence. As I just said, this is not about regulators’ independence; it is about how their functions are carried out. Some regulators requested that they be named in the Bill. They are named in subsection (2), paragraphs (a) to (e): the Gas and Electricity Markets Authority, the Office of Fair Trading, the Office of Rail Regulation, the Postal Services Commission and the Water Services Regulation Authority. Subsection (2) applies the duty to those regulators.

We have included the power in the Bill rather than simply applying the duty to all regulators to allow flexibility in both the extent and the timing of the duty’s applications. The power to apply the duty in a territorial sense is set out in subsections (3), (4) and (5). Subsection (6) requires the Minister to consult the regulator and other appropriate bodies before seeking to apply the duty, subsection (7) allows the order to make consequential amendments and subsections (8) to (11) specify other procedural requirements. The Committee might want to note that an order applying the duty is subject to the affirmative procedure. The clause concerns the functions that we have discussed, which are set out in subsection (1), and the regulators to whom the new duty will apply.

Clause 77

Pat McFadden (Labour, Wolverhampton South East)

I beg to move amendment No. 48, in clause 77, page 37, line 30, leave out subsection (2).

The amendment will remove the privilege amendment made in another place. It is a technical change, but an important one. As hon. Members are aware, the financial powers of the other place are restricted by the rights and privileges of the House and by the Parliament Acts. As the Bill originated in the other place and contains financial powers, a privilege amendment was added to it before its introduction in this House to ensure that the House’s financial privileges were not infringed.

This technical amendment is therefore necessary to remove the privilege amendment, which provided that nothing in the Bill should impose or vary any charge on the people or public funds. It is as much about parliamentary rules as it is about the Bill itself, but it is nevertheless necessary.

Mark Prisk (Conservative, Hertford and Stortford)

Let no one say that we do not learn something in these Committees—I confess to a possible moment of excitement when we saw a Government amendment suddenly lurch forward at the last minute. We were on clause 48 and on Tuesday my office went into full excitement mode—even more than usual—but, lo and behold, it is a technical amendment and does not afford us the opportunity to scrutinise the Minister at great length. It is entirely sensible and so, with a slight hint of disappointment, I will not oppose it.

New Clause 2

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move, That the clause be read a Second time.

Having concluded the clauses, we come to the new clauses. New clause 2 is very important because, as you will have seen, Mr. Chope, it is a sunset clause. As we have discussed, the scope of the Bill is quite significant—technical, yes, but significant none the less. It creates an entirely new local regulatory system and an entirely new non-departmental public body, albeit there is a company in shadow at present. It provides extensive powers of sanction and enforcement, involving not one single regulator but 27; and not one piece of legislation but over 140 different laws. The Bill permits the Secretary of State to make, by order, important changes to both the current and the proposed system of local regulation. That means, I hope, that in all local authority areas we, as Members of this House, will see the potential for improvement in the regulatory environment. However, those changes will affect all our constituents.

In the other place, my noble Friends were able to secure some important concessions, not least that of a three-year review under clause 17 that covers only the LBRO. Given that the LBRO is not, as we have debated, directly accountable to this House, it was right to seek that review. However, clause 17 and the review contained therein does not apply to the whole Bill and that is why it is important to insert the means to debate whether this legislation should persist after a five-year period.

New clause 2 offers a number of important advantages to us as a House. It enables us to assess the whole Act and look at how it has worked in practice. The Minister has understandably looked at the different parts of the Bill in detailed consideration during our deliberations today. However, we can all see that the sanctions regime, the operation of primary authorities and the LBRO’s new and interesting range of powers will not only work in themselves, but will work together. It is difficult to know what the end result will be—it is untried and untested and we cannot be certain about it. The LBRO is not a long-established, familiar organisation that we can judge on its performance, powers and role.

The new clause would allow us to look in particular at the range of sanctions and their impact, especially on small businesses. It would help to focus—this is an important benefit, which the Minister referred to earlier—all the regulators’ minds on their performance not only in the coming year but over the next five years. They would know that we reserve and have the power to scrutinise the legislation in full. The insertion of a sunset clause is not a cheap excuse for getting rid of a piece of legislation without due thought. It would enable the House to ensure that the law of the land is working. The legislation provides significant changes for our constituents.

Rightly, the Government have said that they want to get serious about regulation and reducing the regulatory burden, which I welcome. The new clause provides an opportunity for them to turn that promise into practice.

Lorely Burt (Liberal Democrat, Solihull)

I welcome the prospect of a sunset clause. Earlier in the proceedings, I got a bit excited when I interpreted the three-year review of the LBRO as a sunset clause. On new clause 3, I would suggest that six and a half years is too long a period, but I would welcome a sunset clause proposal. Based on costs of £4.5 million per annum, we would have spent £29 million before the clause would be invoked. That is too much and too long a prospect. A three-year sunset clause would be extremely welcome, and I would also welcome the Minister’s views on how we might go about imposing such a clause not only on this Bill, but on other Government Bills.

Pat McFadden (Labour, Wolverhampton South East)

Let me begin by saying that sunset clauses are perfectly legitimate issues to raise. They are not always inappropriate by any means, and they have been added to a number of Bills, so, on a basic level, it is legitimate to consider them. However, in relation to a Bill such as this, such a clause is unwise, and I shall set out my reasons for so thinking.

The Bill intends to change the regulatory environment to deal with two significant problems, as we have said. The first problem is an inconsistency in the manner in which regulations are applied around the country, which is essentially dealt with in parts 1 and 2. The second problem is the inflexibility in the penalty regime, which is dealt with in part 3.

Business appreciates clarity and certainty, and the Bill intends to give those things. I fear that the insertion of a sunset clause such as new clause 2 would do precisely the opposite. Businesses and other regulated organisations need confidence and certainty when making decisions that the regime that is being implemented will be there for some time. To begin from the premise that the Bill will lapse in the period set out in the clause would damage the Bill, not only at the end of the period, but through its period of operation.

For example, uncertainty about the continued existence of LBRO would make it difficult for it to carry authority and trust. Businesses would think twice about entering into primary authority relationships. We have debated how important those are in ensuring consistency and clarity for businesses a lot in the past few days. If businesses thought that the legal basis for the relationship would be abolished after five years, they would think twice about investing time, and indeed money, in them—there is a cost recovery provision. Would they know that the advice that they had received would hold good in future? That could be a problem. Local authorities would also have a reduced incentive to comply with the guidance of a body that Parliament has said has a time-limited life.

On part 3, for example, when we think about the penalties that we have discussed in some depth, as we approached the sunset point regulators might stop issuing sanctions because their capacity to do so was coming to an end, and they would rely again on the one-club policy of criminal prosecution that the Bill tries to get away from. Regulators would have little incentive to take up these powers, in the knowledge that they would be withdrawn after a period of time.

A review clause is different. It states that we will look at how the system is operating, but it does not say that it will come to an end, as a sunset clause does. Regulators adopting the powers in 2010 would find themselves in the position of having to submit to a review clause after three years, an exercise with doubtful effects in view of the fact that if the new clause became part of the Bill, Parliament would have legislated for the whole regime to go out of existence two years later anyway. For a number of reasons, that is unwise.

A similar clause was debated in the other place too. I am not against review; it is a perfectly sensible thing to do and it is built into the Bill, but that is different from the automatic ending entailed in a sunset clause.

We have had a lot of representations on this issue. If I may detain the Committee with a few of the quotes on the issue, it may give an idea of the strength of feeling about consistency and clarity. The Federation of Small Businesses said:

“The FSB...has invested a great deal of time and effort in pushing for the establishment of the LBRO. It would be sad to see a sunset clause applied to the LBRO as this would severely impact on its ability to function in the interest of 4.5 million small businesses.”

Going from small business to a larger national chain, Boots said,

“the LBRO benefits of the Bill will be lost with the result that industry will be left still dealing with the inconsistencies that Government promised would be addressed by this new approach to regulatory coordination.”

Sainsbury’s said:

“The introduction of the sunset clause will, we believe, make the role of the LBRO more difficult and potentially prejudice its ability to bring about the change which is required.”

There are other comments here and I could go on, but I shall not quote all of them. Finally, the CBI said:

“Sunset clauses in principle are a good tool to ensure that regulations are fit for purpose and deliver their objectives. But we feel that the specific addition of a sunset clause would not materially add value in the case of the RES Bill... such an amendment could reduce the LBRO’s ability to implement its goal of improving the quality of local authority enforcement.”

So I think we can see a broad opposition to the new clause, both among organisations representing small business and some well-known big businesses. For those reasons, I hope that the hon. Gentleman will not press the new clause.

Mark Prisk (Conservative, Hertford and Stortford)

I am interested to hear some of the quotations. There are other quotations from other similar organisations, not specifically on the sunset clause, but on the measures that the Bill represents. The CBI says that the Bill represents for business a “leap of faith”. We need to be careful, therefore, about how we selectively quote what different organisations think.

Pat McFadden (Labour, Wolverhampton South East)

Would the hon. Gentleman accept that the quotes that I read out are specifically related to the sunset clause, and the quote that he has read out is not?

Mark Prisk (Conservative, Hertford and Stortford)

Absolutely. Equally, in the end we have to decide whether what we do in this House is right. I am always happy to listen to the business audience and ensure that their concerns are accurately represented, as I have done in the past two days, but in the end we must make sure that this House reserves its right to consider these matters without due prejudice. I want to ensure that we do that properly.

The point about a sunset clause is not the presumption that we will remove the Bill; it is to provide a point when it can be replaced, removed or renewed. I suspect that the good elements, which businesses clearly wish to see maintained, would be renewed. A sunset clause is not final: it may be the end for the Bill, but it may not. It allows Parliament to consider whether what is on the statute book is working.

I accept that it is difficult to strike the right balance, and have said on a number of occasions that parts of the Bill have considerable merit. I welcome many of them, but I am sceptical whether others will achieve what the Government hope. I suspect that we share the hope for a better regulatory environment, but should the regime be permanent or, after reviewing particular elements of the Bill—but not all, because we do not have that opportunity—should we have the option of annulling it on 1 January 2014, which after all is some distance off?

With respect to the organisations that the Minister mentioned—I know them well—I do not buy the argument that the fact that there might be a review in Parliament of the Bill means that no one will make a deal or memorandum of understanding with a primary authority for the next six years. Neither do I buy the Minister’s argument that the LBRO will struggle to survive or fulfil its functions, if on 1 January 2014 Parliament has the opportunity to reconsider how the legislation is operating. I fully accept that we will want to consider that carefully, and it might well be that a future Government at that point would wish to enhance, or even improve, this legislation. I suspect that that would be well within the reach of future Governments upon consideration. At the moment, the House will have no means of considering it after Third Reading. That will be the end of the matter. There will be a review—that is fine—but only on specific elements and orders. That is why this new clause is so important. I am not convinced by his comments, so I wish to press the new clause to a Division.

New Clause 3

Lorely Burt (Liberal Democrat, Solihull)

On a point of order, Mr. Chope. I seek your guidance before we proceed. I was somewhat surprised to see new clauses 4 and 5 on today’s selection list. They were not originally chosen, but were both intended to be included with my amendments Nos. 58, 59 and 60, which would have replaced clauses 28, 29 and 30. I am ready, willing and able to go ahead with this discussion, but in view of the fact that we have already discussed clauses 28, 29 and 30, I ask your guidance. Do you consider this to be an appropriate time to discuss the new clauses, or do you feel that we should leave it to a subsequent stage of the Bill?

Christopher Chope (Conservative, Christchurch)

I am in the hon. Lady’s hands. The new clauses are hers, so she can decide not to move them if she wants. The reason why they were not on the selection list for debate on the last occasion was that they were effectively starred. They were ruled out because sufficient notice of them had not been given before the Committee met. Now they are in order and in time. If she wants to discuss them, we can propose them and deal with them accordingly after she moves them. If she does not want to move them, that is her decision. I hope that that is helpful.

Lorely Burt (Liberal Democrat, Solihull)

I am grateful for your guidance, Mr. Chope. I would therefore like to introduce the new clauses and explain why I wanted them included.

Christopher Chope (Conservative, Christchurch)

Order. The hon. Lady must realise that new clauses are separate items. One cannot discuss them together. They are not grouped for debate, so they must be discussed seriatim.

Lorely Burt (Liberal Democrat, Solihull)

I apologise if I was misleading in describing them.

New Clause 4

Lorely Burt (Liberal Democrat, Solihull)

I beg to move, That the clause be read a Second time.

New clause 4 would remove primary authorities’ blanket power to prevent local authorities from taking enforcement action in their own area, while ensuring that the courts have the evidence that they need to treat business fairly and that primary authorities have intelligence on regulatory issues affecting the businesses that they work with.

Clause 28, which we have discussed, bestows on one local authority the power of veto over another local authority’s enforcement decisions. Not only is that undemocratic, but it gives the primary authority de facto powers of legal interpretation, which are the proper function of the courts. New clause 4 proposes to remove that veto and leave it to the courts, rather than the primary authority, to decide whether enforcement action is unjustified in the light of advice given to a company by the primary authority. It would protect the Bill’s intention to promote consistency and deter unjustified enforcement action without the attendant objectionable transfers of power involved in clause 28. Subsection (1) of the proposed new clause would improve the primary authority’s ability to focus its work on the area of greatest need by ensuring that it has the fullest possible picture of the company’s health and safety performance.

Pat McFadden (Labour, Wolverhampton South East)

I ask colleagues to oppose the new clause if it is pressed to a vote. The Bill is about tackling inconsistency in local regulatory enforcement. I fear that passing the new clause would change fundamentally the balance of authority between the enforcing authority and the primary authority, therefore militating against the removal of that inconsistency, which is a central premise of the Bill. As the hon. Lady said, we are in the slightly odd position, technically, of discussing a new clause that, if passed now, would leave us with two parallel regimes. On Tuesday we discussed the primary authority scheme fully. However, I will leave that aside and deal with the new clause on its merits.

The new clause seeks to table an alternative approach to the primary authority partnership, whereby the enforcing authority would simply have to inform the primary authority if it was going to act, without the primary authority being able to take a view on that, as set out in the Bill. I understand that the original intention was to protect local authorities’ discretion to pursue any enforcement action that they choose by replacing the primary authority principle with an information-sharing provision. As I said, that is a very different relationship and, from the point of view of the regulated, would introduce much more uncertainty into the system. It would pose a serious question mark over why they should go to the trouble of constructing a primary authority relationship if the primary authority had no say over how the local enforcement authority was going about matters.

Businesses have asked us to provide access to a scheme that will provide them with more dependable advice and much quicker resolution of disputes between authorities, giving them the certainty and clarity that they seek. The Government start from the principle, enshrined in the Bill, that where a business and a local authority have gone to the trouble of establishing that primary authority relationship, there should be a presumption that the advice given by one professional should be respected by other professionals across the country, unless there are—again as set down in the Bill—emergency situations or other good reasons for an exception, particularly for local situations and so on. We do not want to undermine that relationship as a whole, as the new clause would do by removing the primary authority’s ability to intervene. In our scheme the primary authority’s right to direct that a particular action should not take place is only operative when the primary authority concludes that the enforcement action conflicts with advice.

The hon. Lady may remember that we had a discussion about the consistency of advice previously given to a business. The new clause would water down the provisions in the Bill by removing the primary authority’s right to intervene and the enforcing authority’s right to take the matter to arbitration through LBRO. That would give businesses less effective protection.

The hon. Lady also talked about who interprets the law. I understand that concerns remain among some in enforcement about the primary authority or LBRO effectively having jurisdiction over enforcement actions that a particular authority may wish to pursue. She also raised a concern on Tuesday that the scheme gives the primary authority and LBRO—I think she used the phrase a moment or two ago—de facto powers of legal interpretation, which are the proper function of the courts.

Let me make it clear that the new provisions will not undermine the courts, nor take over the legitimate role of legal interpretation. The idea behind the scheme is that, where a local authority has given advice to a business and a business has followed that advice in good faith, businesses should, unless there are good reasons to the contrary, be able to expect that they will not have serious action taken against them by another local authority. Neither LBRO nor the primary authority can give a once-and-for-all answer about the legality of a particular approach. Rightly, that decision must lie with the courts.

One of the issues on which LBRO, in determining whether consistency can be upheld, can take a view is on whether the advice or guidance from the primary authority was correct. LBRO will not be giving the opinion that there is only one correct piece of advice or guidance, but will be giving the opinion that the advice or guidance is not inconsistent with its understanding of the law as it stands at the time of arbitration. It will not therefore be usurping the role of the courts over legal interpretation. If it is not satisfied on those points, the enforcement action may go ahead and that might, in turn, mean that the matter could go to the courts. The main purpose of the primary authority scheme is to provide the consistency of enforcement to which I have referred. That is a change from existing practice, but it is important. The proposed scheme would not deliver the same, and would maintain the inconsistency that the Bill is attempting to answer.

People have raised issues about the primary authority scheme, but I hope that I have outlined how it is circumscribed. I also hope that I have clarified what it will do, and what it will not do. In the light of that, I hope that the hon. Lady does not press the new clause to a Division.

Lorely Burt (Liberal Democrat, Solihull)

I am grateful for the opportunity to discuss the new clause because important issues needed to be expressed, as did the concerns of local authorities, in particular. I am grateful to the Minister for his comments and, on occasion, the reassurances that he has given. I beg to ask leave to withdraw the motion.

New Clause 5

Lorely Burt (Liberal Democrat, Solihull)

I beg to move, That the clause be read a Second time.

The new clause would broaden the scope of the suggested inspection plans to enable the primary authorities to publish a broad range of information about businesses that would be of benefit to other local authorities when exercising their functions. Furthermore, it would remove the bureaucracy associated with such plans by removing the requirements for written notifications and justifications if, for any reason, a local authority needs to carry out an inspection in response to local circumstances that fall outside the approach detailed in the published plan.

Clause 30 would have limited value in helping local authorities effectively co-ordinate and target their enforcement activities. It focuses only on planned inspections, which are only a small part of the regulatory work of regulators. The new clause allows for the publication of information that is far more useful to councils and enables regulated persons or entities to get information to all councils about safeguard systems and planned improvements. The clause would also fetter local authorities’ ability to respond at a local level to local issues, and it would add a level of bureaucracy that ultimately has no impact.

The new clause would still require a local authority to have regard to any published compliance plan, but it would remove the requirement for it to notify and justify to a primary authority why it acted in a way that did not fall within a published plan. It adds no value for a primary authority to stop another local authority acting outside the plan. A regulated person or entity has the right to complain via a local authority’s complaints procedure and, if necessary, via the independent local government ombudsman or judicial review if it considers that a local council has acted inappropriately.

If a primary authority can set out in the plan how often inspections should take place, I am concerned that the plan will lack the flexibility to deal with the very situation to which Lord Jones referred in another place. I cite the example of inspectors at the Tesco store at Olive avenue, Coventry, which is not a million miles away from my constituency. They undertook five inspections of the store, four of which were in response to customer complaints, and alleged that food was on sale past its use-by date. In total, 142 items of food were found available for sale past their use-by date. Despite alerting both branch managers and Tesco head office on each and every occasion, the failings within the store were not rectified. By the fourth visit, the situation was getting worse and officers discovered 73 items on sale past their use-by date, including 11 that were 10 days past it.

The point of the story is that Tesco began its submissions by apologising to the court for its failings and attempting to argue that its due diligence system was good, even though it accepted that it had not been correctly implemented this time. It argued that the failings were due to human error and placed the blame on the store manager. Clearly, the court decided otherwise, and Tesco was eventually fined £133,400 with £8,976 in costs. The point is that the local store failed to act on what was an acceptable company policy. In such cases, the primary authority could not be expected to know as well as the local authority which local stores were failing to comply with company policy. It could therefore set an inspection regime based on the assumption that a nationally agreed process was being implemented everywhere. As a result, a local authority might be prevented from undertaking inspections at a store that was not living up to national standards, and nothing would be done until an outbreak of food poisoning or, in a different type of environment, an accident.

Pat McFadden (Labour, Wolverhampton South East)

To some extent, my difficulty with this new clause is similar to my difficulty with the last one. The primary authority principle tries to give the regulator some sense of clarity and consistency about what to expect. The inspection plans set out in clause 30, which this new clause would replace, are part of doing that. Clause 30(3) gives examples of what could be in an inspection plan, mentioning

“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 and the Government expect inspection plans to include other information such as recommendations, enforcement and information on a wide range of issues relating to a business with which a primary authority has a partnership. The guide to the Bill, which I have referred to several times, includes some of those issues, suggesting details of improvements that a business is undertaking to improve its health and safety procedures, or details of ongoing problems relating to compliance that other local authorities should pay particular regard to. The issues in the new clause can be addressed in the inspection plan in clause 30. LBRO will take the issues raised into account when giving guidance to local authorities on implementing the inspection plans.

I have another point about the hon. Lady’s new clause. I am not sure that what she said was correct. She said that the new clause still required the enforcing authority to have regard to the plan—I am not sure that it does. It removes the key requirement for local authorities to have regard to a registered inspection plan when undertaking inspections and to notify the primary authority before departing from it. This is not only a replacement for the inspection plan; it puts a far lower level of onus on the enforcing authority to pay any heed to it. The Government expect that inspection plans will help to reduce unnecessary business inspections and facilitate knowledge sharing between primary and enforcing authorities. The compliance plan, as set out in the new clause, would not provide for that, because it would break the relationship whereby the enforcing authority has to have regard to the plan. Achieving those aims rests on ensuring that enforcing authorities have regard to an inspection plan and that they inform the primary authority of the reasons that they might depart from such a plan.

The hon. Lady talked about the need for flexibility, which is absolutely right. Of course we need flexibility in dealing with, for example, the problem of selling out-of-date food. That was a fair point. Inspection plans should always allow for the capacity to respond effectively to emergencies or, in particular, local circumstances, and plans will need LBRO sign-off to ensure that they are not unreasonable or totally inflexible. Through the primary authority principle, and the inspection plans in particular, we are trying to promote a relationship that offers consistency to those regulated, and a dialogue between local circumstances and the primary authority. I am afraid that, on those counts, her new clause would take us away from the aims of the Bill, so I hope that she will not press it to a vote.

Lorely Burt (Liberal Democrat, Solihull)

I thank the Minister for his enlightening comments. I still feel that my proposal has many merits, particularly on information sharing and the spreading of best practice among local authorities. However, I take on board a number of his points, and I do not wish to press the new clause. I beg to ask leave to withdraw the motion.

Pat McFadden (Labour, Wolverhampton South East)

I thank the Committee for the way in which our business has been conducted over the past couple of days. In particular, I thank my hon. Friend the Member for Stafford for the questions that he put to me on clause 65—it was a welcome and enlightening intervention. I also thank my hon. Friend the Member for Amber Valley, who serves on the Regulatory Reform Committee, for bringing her expertise to our deliberations. My hon. Friend the Member for Glasgow, North kept us in line in regard to Scottish law and gave us some legal advice, which I think in former life might have cost us a great deal more. Her help was extremely valuable. I resisted the attempts by my hon. Friend the Member for Stroud to divert us into a discussion on the merits or otherwise of two-tier and single-tier local government. I would like to thank all my other hon. Friends for their contributions.

I thank the hon. Member for Solihull, who has been labouring under extreme sickness—from the sound of her coughing—and I hope that she gets well soon. She moved a number of amendments, and raised a number of issues, that were also raised in another place. They are important issues, and we take them very seriously. Of course, I also thank the hon. Member for Hertford and Stortford, who has probed and occasionally pressed with great skill and courtesy, for the way in which he has conducted the debate on the Bill and his amendments. I am conscious that there are a couple of points on which I have said that I will write to him, and I have not forgotten those.

Finally, of course, I wish to thank you, Mr. Chope, for your skilful, impartial and enlightening guidance in getting us through the Bill over the last couple of days. This is, as the hon. Member for Hertford and Stortford said, an important Bill, if a technical one. In all the discussion of the individual clauses and amendments, we should not lose sight of the aims, which, as I have said, are to tackle the two problems of inconsistency and inflexibility in the current regulatory regime. If we manage to do that, we have done a significant service to the general public, to those who are regulated, and we will also have saved business in the country a significant sum of money—an estimated sum of up to £200 million—in regulatory costs. That is important because we want business to concentrate on the business of doing business, rather than the kind of costs that can hopefully be reduced by legislation such as this.

Mark Prisk (Conservative, Hertford and Stortford)

At the beginning of our deliberations I said that I would try to be precise in scrutiny and concise in my remarks, and although I have not been entirely perfect in those terms, I hope that I have not detained the Committee longer than was necessary. We have had some useful debates. We have seen at least eight concessions, or clarifications, from the Minister on the way that the law will work; they are crucial to those whom it will affect. He has just alluded to the fact that there will be two or three occasions when he needs to write to us as a Committee to set out the Government’s position. We fully understand, and it is important that that is on public record. When those concessions or clarifications are viewed in combination with the dozen or more important concessions acceded to in the other place, it can be seen that Parliament has undertaken its duty of proper, effective and focused scrutiny.

It falls to me to extend a few thanks. I should like to thank the Minister for his considered approach to my probing and pressing on various matters in Committee. I know that very often people outside this place assume that Prime Minister’s questions is the sole way that we can do our business, and although that is important—indeed, very important, but occasionally some Members get a little carried away, although obviously not on my side—what is important, nevertheless, is deliberations of the type that we have had. They have been measured and considered, and I thank the Minister for that.

I also extend my thanks to my hon. Friends, particularly my hon. Friend the Member for Billericay, who has been a tremendous support, and other hon. Members who have made individual and particular contributions. Could I also, as the person who has been more than happy to table one or two amendments, thank the Clerks and Officers of the House, who are fantastic in the way in which they patiently take us through measures that are self-evidently nonsensical and turn them into something that has a semblance of order? I am very grateful to them for that.

Last but by no means least, indeed most importantly, I should like to thank you, Mr. Chope, for the light-touch and speedy way in which you have regulated our proceedings.

Lorely Burt (Liberal Democrat, Solihull)

The Committee has been a shining example of how we can work together as a Committee, composed of Government and Opposition parties, in a concise and constructive way to examine clause by clause a Bill that had already greatly benefited from examination and amendment in another place. Our work was not unduly onerous, so I should like to convey my thanks, particularly to the Clerks, who have laboured with my strange and unusually phrased amendments, and have turned them into something acceptable. I thank the Minister for the helpful and constructive way in which he has dealt with the queries and amendments that I have raised. Finally, I thank you, Mr. Chope, for your wise guidance during the proceedings.

Christopher Chope (Conservative, Christchurch)

I have always been in favour of self-regulation, and what has happened during the proceedings of this Committee is an exemplary example of self-regulation. I am grateful to the Minister for his comments, and to the hon. Members for Hertford and Stortford and for Solihull for what they have had to say. I should like to echo their thanks to the Clerks of the House, to the police, to Hansard, the Badge Messengers and everybody who has enabled our proceedings to move so smoothly. The person who will probably be most thankful for all this is the hon. Member for Carlisle who will not be troubled as co-Chairman of the Committee.