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Regulatory Enforcement and Sanctions Bill [HL]

My Lords, I thank the noble and learned Lord, Lord Lyell, for his eloquent contribution to the debate. He will not be surprised to hear me say that I regret that we cannot accept the amendments, which are profound and would render Part 3 of the Bill pointless. A large number of questions have been raised. On points of fact, I will be happy to write and have further discussion. I have received many notes from my staff with detailed answers, but given the time, I shall confine my remarks to restating the benefits and the purpose of the Bill. The new sanctions will enable regulators to enforce offences much more effectively. They provide a clear, more flexible and proportionate approach to enforcement, and should help reduce the level of non-compliance and enable a more co-operative and consensual approach to regulation. The noble and learned Lord has implied that criminal courts provide an adequate system and that there is no such thing as a compliance deficit. We should not forget that the powers in Part 3 are an alternative to criminal prosecution, and that the courts will have a continuing role to play in enforcing such offences. Professor Macrory said that the more serious and egregious cases should be dealt with by criminal courts to preserve the stigma of criminal conviction. Companies should not disregard criminal fines and sanctions as part of the normal cost of doing business. We should not forget that Professor Macrory made a number of recommendations that would help the criminal courts to tackle regulatory offences. He felt that the courts should be better equipped to deal with such offences by improving training, sentencing guidelines and information from prosecutors, and introducing new sentencing options. These recommendations were accepted by the Government in full and are being taken forward separately from this Bill. As my noble friend Lord Borrie said, criminal prosecutions are not an answer in every case. Not every breach of regulation will warrant a criminal prosecution but most regulators lack a viable alternative means of enforcement, which has left them overreliant on criminal prosecution as a means of tackling breaches of regulation. This is what Professor Macrory identified as the compliance deficit, where no enforcement action has been taken because the appropriate tool is not available to the regulator. These civil sanctions provide more flexible means of tackling regulatory non-compliance. Magistrates’ courts do not always have the necessary tools to tackle regulatory non-compliance. These cases tend to make up less than 1 per cent of all cases heard in magistrates’ courts. Philip Hampton, for example, found that a magistrate will typically see a health and safety offence once every 14 years. In contrast, regulators will be solely concerned with dealing with regulatory non-compliance in a particular field and will have a better overview of the seriousness of cases, the nature of the market, the profits made and the participants in that market—a view the regulator would have to take account of when it came to individuals as well as businesses. They will also be better equipped to set penalties that can provide an adequate sanction and deterrent, and can ensure that there are fewer regional variations. They will also be able to engage in more co-operative regulation by accepting undertakings from a business that is keen to put right any harm caused by its actions. The noble and learned Lord accepts that administrative penalties have a role to play in certain regulatory fields. It is worth remembering that 15 regulators already have access to civil sanction, including the Health and Safety Executive, the Financial Services Authority, the Trading Standards Institute, the Office of the Rail Regulator, the OFT, Ofcom, Ofwat and Ofgem. The noble and learned Lord also raised concerns about the scope of the new provisions. We have limited access to the new sanctions to those regulators listed in Schedule 5, those who enforce the offences listed in Schedule 6 and those who enforce offences in secondary legislation made under enactments listed in Schedule 7. There is no power in the Bill to add to this by order. The new powers will obviously be granted to regulators by ministerial order and require an affirmative resolution procedure. These new sanctions have also been subject to a thorough process of consultation, both as part of the original Macrory review and following publication of the draft Bill. They were welcomed by regulators, businesses, local authorities and representatives of the judiciary. I can provide quotes from the copious notes I have now received from representatives of the judiciary welcoming this. Concerns were raised in your Lordships’ House about the safeguards in place. Incidentally, it is not right to say that Article 6 has been ignored in the design of the civil sanctions. Noble Lords will have seen in the Explanatory Notes that we have considered such matters and are sure that the Bill contains minimum procedural requirements to ensure that Article 6 is protected. We have also given detailed answers to the Joint Committee on Human Rights on its questions on Article 6 in a letter dated 14 January 2008. This letter is in the House Library. I will not accept that we have not considered these matters. We listened to concerns raised by noble Lords. We have taken these into account and significantly improved the Bill. We added details on the grounds for appeal, a requirement on the Minister to review the effectiveness of any order conferring powers after three years, a power for the Minister to suspend the use of new sanctions where they are persistently misused and to specify that a regulator must be satisfied to the criminal standard of proof prior to issuing a fixed monetary penalty or discretionary requirement—which is why the analogy with the traffic warden really does not apply. We have also added, during the Bill’s progress through this House, a proposed notice of intent stage in the imposition of fixed monetary penalties, restricted the level of fixed monetary penalties and variable monetary penalties and how they can be set, and simplified the method of setting them, requiring regulators to publicise details of enforcement activity. That is in addition to the safeguards that were in place in the Bill on its introduction. I understand the concerns expressed by the noble and learned Lord about a system in which a regulator rather than a court will impose a sanction. As I have already outlined, the Bill has put in place many safeguards, which mean that there will be no disadvantage for persons who will be subject to a civil rather than criminal sanction. In fact, there may be an advantage in having a system administered by trained experts experienced in the regulatory field. Amendments Nos. 49, 50, 51, 52, 55 and 60 would prevent regulators imposing any of the new sanctions or accepting undertakings. Amendments Nos. 49, 50, 55 and 60 specifically would prevent regulators imposing any kind of monetary penalty. The noble and learned Lord’s amendments suggest a fundamental disagreement with the introduction of the civil sanctions and that these sanctions should be removed from the Bill altogether. I regret that I do not see what more we could do to satisfy him. Amendment No. 52 would remove the exclusion of the police and prosecution authorities, such as the Crown Prosecution Service, from the definition of regulators in Clause 36. It would therefore allow these authorities to impose the civil sanctions in Part 3. As we stated in Committee, the new powers in Part 3 are an alternative to criminal prosecution and the latter will remain available to the police and prosecution authorities. The powers in Part 3 are designed specifically for use by regulators, who have closer ongoing relationships with and supervision of businesses, and it would not be appropriate to extend their usage to the police and prosecution authorities, which are primarily concerned with criminal matters. Under Clause 68, police and prosecution authorities will be able to refer matters to a regulator if they consider that a civil sanction may be more appropriate. Given the lateness of the hour, I have nothing further to add except that I hope that the noble and learned Lord will feel able to withdraw the amendment.