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Regulatory Enforcement and Sanctions Bill [HL]

My Lords, I am grateful to the noble and learned Lord, Lord Lyell, for his contribution to this debate. I have sent him a full reply to the points he raised on Report and, as he mentioned, I met him on Friday with my noble and learned friend Lady Scotland and my noble friend Lord Bach. We discussed his concerns in more detail and, having understood each other well, he will not be surprised to hear that we strongly disagree with his amendments and the intentions behind them. The points that I wish to make have been eloquently made by my noble friend Lord Borrie and the noble Lords, Lord Newton and Lord Razzall, and I am very grateful for the intervention of the noble and learned Baroness, Lady Butler-Sloss. However, I shall provide clarification of the Government’s views, which, because of the lateness of our previous debates, have not been on the record. I start by restating the case for these measures. We live in a world of fierce global competition. It is imperative that we create the most competitive environment for our growing businesses. They need to be able to get on with what they do best: creating wealth and jobs; a sentiment in which I know those on the Opposition Benches strongly believe. The burden of disproportionate regulatory enforcement is a central issue for business, yet we still have a system of regulatory enforcement born out of Victorian times, protecting workers from the onslaught of industrialisation. We now live in an age where this has been delivered in the main. We now have informed customers, empowered employees and enlightened companies. Above all, they value their reputation and their brand. We do not need to criminalise all of them for every regulatory non-compliance, or even for most of them. I make absolutely no apology for that. This is not a stigma that they deserve in every instance, or that will assist them to compete effectively for Britain. The noble and learned Lord has made a number of detailed points over the course of Committee and Report, and I would like to go through some of them as briefly as I can. The noble and learned Lord implied that the new sanctions represent a significant constitutional change, violate the separation of powers and oust the jurisdiction of the courts. They do not represent constitutional change or undermine the courts. Civil sanctions have been long established. There are precedents from the 19th century relating to Her Majesty’s Revenue and Customs and there are those today that the noble Lord, Lord Razzall, referred to in the Financial Services Authority, Ofwat and the OFT. Some civil sanctions clearly operate to divert cases out of the criminal courts; for example, conduct concerning market abuse or evasion of VAT can attract both kinds of sanctions. This kind of scheme has attracted wide support from the public and business. Even the Court of Appeal, in the Han case, has endorsed such schemes. Civil sanctions also supplement criminal prosecution in areas such as anti-social behaviour orders, serious crime prevention orders and orders under the Proceeds of Crime Act 2002. There is evidence to show that they lead to improved outcomes in terms of changing behaviour and promoting compliance. Civil sanctions do not in any way undermine the role of criminal prosecution. As noble Lords should by now be well aware, the Bill ensures that criminal prosecution remains the alternative preferred approach for the more serious cases, especially those where there is deliberate intent or repeated negligence. Doing so enables the courts to concentrate on the more important cases that merit prosecution and would increase the stigma and reputational harm and therefore the effectiveness of criminal prosecution. The noble and learned Lord has on occasion implied it is not a matter of precedent but of the scale of cases transferring away from courts. Of course we are seeking to widen the potential use of civil sanctions, hence the Bill. We are seeking this in a measured and targeted way for effective regulators, and I shall come on to talk about that. I wrote to the noble and learned Lord on 21 April giving him the results of a thorough review of the statistical evidence undertaken by my officials. We estimate that there are currently between 30,000 and 40,000 prosecutions for regulatory offences that could potentially be dealt with in future by one of the new sanctions. That is higher than the estimates originally made by Professor Macrory, but I shall give noble Lords a sense of the scale: this is still only 2 per cent of all prosecutions in criminal courts. The noble and learned Lord implied on a number of occasions that we are putting businesses at the mercy of junior civil servants with a tick-box mentality, a sentiment that has been echoed by the noble Baroness, Lady Wilcox. I shall make a case that I believe in very strongly. The advances in technology that have driven globalisation have also fragmented the supply chain in production and services, which means that we have niche businesses and very specialised businesses on a scale that we have previously never had in our economy. Britain in particular has benefited from this trend because of our openness to globalisation, an issue on which I believe there is cross-party support. In this environment, I defend, not condemn, the role of experts in a modern economy, and that includes the role of expert regulators. Instead of a magistrates’ court, which Hampton said hears, on average, a health and safety case only every 14 years or an environmental case only every seven years, businesses value a regulator whose job it is to understand their business, their market, the detailed regulations and therefore the nature and seriousness of the non-compliance with those regulations. They value a move away from adversarial and confrontational prosecution to co-operative and consensual regulation which encourages buy-in, better compliance and therefore a better outcome for the stakeholders who regulations are seeking to protect.