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Regulatory Enforcement and Sanctions Bill [HL]

On Amendment No. 112, the Bill allows some flexibility in the calculation of fixed monetary penalties. The penalty must either be a prescribed amount or calculated solely by reference to prescribed criteria. Flexibility is necessary to ensure that the penalty is an effective deterrent. For example, the level of penalty could differ, as we have already said, according to whether the person liable is an individual or a large company. It could also ensure that small businesses are not disproportionately affected by fixed monetary penalties. The regulator, however, will have no discretion in setting the level of penalty. The Bill will require the method for calculating monetary penalties to be published in the penalty guidance, so there will be that level of transparency in the process. On my Amendments Nos. 114 and 115, the Delegated Powers and Regulatory Reform Committee, in its report on the Bill, recommended that the level of fixed monetary penalties should not exceed the maximum amount payable if the offence had been tried summarily. In practice, we would expect fixed monetary penalties to be reserved for more minor instances of non-compliance but, in any event, the Government are happy to accept that recommendation, as I do in those amendments. The noble and learned Lord’s Amendment No. 117 would cap the level of fixed monetary penalties at half the maximum amount of the fine that would be available in the courts. The Macrory review recommended that, as a general principle, penalties should seek to capture the financial benefit made from regulatory non-compliance. That has been one of the failings. Sometimes in quite well publicised cases, the penalty from the court has not meant anything other than that the company—the regulated body—has made quite a large profit out of its misbehaviour. Macrory wants to stop that, as I think we all do. Our fear would be—I suspect the noble and learned Lord anticipated this—that capping fixed mandatory penalties in the way proposed by this amendment would unnecessarily restrict a regulator’s ability to do that. We can imagine a case where, under this system, the restriction to a half would mean that some companies actually did rather well out of the fixed monetary penalty in some instances, so that is not the way to proceed. It might render fixed monetary penalties an ineffective alternative to criminal prosecution, where criminal prosecutions themselves have sometimes been unsatisfactory. We entirely understand the concerns of the noble and learned Lord about the use of fixed monetary penalties. Of course, there are safeguards built into the process, but I am not going to go over that ground again; we have debated it at length today. There will be considerable savings to business should a regulator choose to impose a fixed monetary penalty rather than pursue a criminal prosecution. In particular, business will not have to pay for legal representation before the courts, and the regulator will not be able to reclaim the costs of investigating the offence. That happens in the criminal courts, where a successful prosecuting regulator will inevitably ask for costs from the regulated person who has been convicted. That is my answer to the noble and learned Lord’s amendment. To return to the noble Lord, Lord De Mauley, the criteria will be specified in the order made subject to the affirmative resolution procedure. Regulators will not be able to vary the criteria to be employed without a further order.