Clause 42
Regulatory Enforcement and Sanctions Bill [Lords]
6:00 pm
Pat McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)
The amendment intends to impose a cap on variable monetary penalties. We have a cap on fixed monetary penalties, but that goes back to the point made by the hon. Member for Solihull about the punishment fitting the crime. The cap for fixed monetary penalties relates to the nature of the offences; having a cap for variable penalties would be analogous to capping Crown court fines. A cap on variable penalties, while debated a lot in the other place, is different from a cap on more minor, summary offences. We continue to believe that a cap for the most serious offences would not be appropriate. I would be interested to know what level the hon. Gentleman thought might be appropriate. Even in the current regime, without the new powers, sanctions and fines that run into millions of pounds have been imposed. I am not sure where such a cap would be set in any meaningful way.
The issue is not just the level of the fine, but the kind of offence. The hon. Member for Solihull is right that the level of penalty should be related to the level of offence, rather than being a number that a Minister may set down in an order. Regulators must be able to capture any financial benefit gained from non-compliance. One of the weaknesses of the current system is that sometimes fines imposed are small in relation to the benefit that the offender has gained by committing the offence. That was one of the recommendations in both Hampton and Macrory. If a business knows that profit gained from committing the offence will be removed, with the possibility of an additional penalty on top, a potential incentive to try to break the law and get away with it is removed. We fear that if a cap on the fine is set down, that could deter compliance and militate against ensuring a level playing field for compliant businesses.
In making an order under part 3 of the Bill, the Minister may consider whether a cap is necessary, but we do not think that there should be an obligation on the Minister in every case, as I believe would be the effect of the amendment. Setting a cap on the monetary penalties is not simple, because it involves deep knowledge of the regulatory law, the relevant market conditions and the amount of benefit that has accrued to the offender through committing the offence, over what could be some time. Professor Macrory ruled out a cap based on a business’s turnover, as he thought that that would pose undue legal complexity. The regulator will be required by clause 62 to publish guidance, setting out the criteria that it is likely to take into account when setting the level of variable monetary penalties, so there will be some transparency in the process, but the amendment proposes a mechanism that would effectively cap variable monetary penalties in every case.