Clause 51 - Financial penalties

Water Bill [Lords] – in a Public Bill Committee at 10:45 am on 16 October 2003.

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Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs) 10:45, 16 October 2003

I beg to move amendment No. 84, in

clause 51, page 62, line 6, leave out from 'penalty' to end of line 7.

I have been looking forward to this amendment, because the idea that a penalty should be

''of such amount as is reasonable in all the circumstances of the case''

should be implicit. My amendment would ensure that it was implicit. I do not understand how a penalty of ''such amount'' could be unreasonable. All penalties should of course be reasonable in the circumstances of the case; that should be fundamentally implicit.

Having been told all morning that various things are implicit, I think that the amendment would delete some unnecessary verbiage from the Bill and ensure that all penalties were naturally balanced, reasonable and took into consideration all circumstances of the case.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs 11:00, 16 October 2003

I take it that the hon. Gentleman thinks that the penalties should be unreasonable, which does not seem very user-friendly in relation to business. The amount that is reasonable in the circumstances of the case is spelt out very clearly in the Bill. We would expect the authority to follow such principles of natural justice, but it is important to provide in the Bill a safeguard for the company. That would ensure that a failure by the regulator to apply the provision would be grounds for appeal under new section 22E. We return to the question of balance. Consumers have rights, as do companies, and we are trying to reflect both. That is the principle behind the clause.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I am grateful to the Minister for that reply, but it did not address the problem of that being implicit in the Bill. We have had to put up with that attitude all morning, and for once he should have been more willing to give ground. I know that it is very difficult to get a Minister to give an inch, particularly the Minister in these circumstances, but I do not feel that this is a make or break part of the Bill, nor is it a wrecking amendment. It would have improved the wording under some interpretations. It is not a die-in-the-ditch amendment at all; it is satisfying for me to tell the Minister that something should have been

implicit, but it is not. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I beg to move amendment No. 85, in

clause 51, page 65, leave out lines 2 to 5.

The amendment would clarify the wording in the Bill. The clause states:

''If the whole or any part of a penalty is not paid by the date by which it is required to be paid, the unpaid balance from time to time shall carry interest at the rate for the time being specified in section 17 of the Judgments Act 1838.''

I suspect that that is normal, but it seems to be a little draconian in relation to what we are dealing with. It is not a question of a court case, but how the authority shall behave. I do not know if anyone has ever been forced to pay an unpaid balance at the interest rate specified in section 17 of the 1838 Act. It is an interest rate very different from the one that the Chancellor will no doubt be trumpeting this afternoon. I suspect that the provision is unduly harsh, which is why I sought to have it withdrawn.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

The hon. Gentleman is nothing if not even-handed. We are veering from being nasty to companies to being nasty to consumers. If there is an outstanding balance on a penalty that is being repaid to the company in sums, it is not unreasonable that there should be a charge of interest. The proposed change to clause 51 would remove an incentive for the company to pay a penalty on time, which is very important.

Photo of Hugo Swire Hugo Swire Opposition Whip (Commons)

Referring back to an earlier discussion, when we talked about people who default on their water bills, would the Minister explain what penalties defaulters will be encouraged to pay in terms of interest when they are chased up by the Government, as he promised earlier?

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

At present, it is open to the companies to take court action against their defaulters. If the court thinks that there is no good reason why people have not paid, it could apply penalties, including interest. That is a matter for the courts, and the provision is there. However, that is not an excuse, because if people are deliberately withholding payment it is reasonable to impose some penalty. I do not disagree with that, but one cannot then argue that we should remove the similar provision in relation to companies. If they have to pay a penalty, they should pay it on time. If they do not there is a charge of interest. It is also established practice that an appropriate rate of interest should apply in the event of late payment of a penalty or fine imposed on a corporate body, which is covered in the Utilities Act 2000. The provision is in line with existing legislation and practice.

Photo of Norman Baker Norman Baker Liberal Democrat, Lewes

The question of interest is not controversial, at least to my hon. Friends and me. In his introduction, the hon. Member for Leominster made the point that the provision is unduly harsh. I do not know whether that is true, because I am not familiar with section 17 of the Judgments Act 1838. Is that true or is the provision a standard condition of the 1838 Act?

I should point out in passing that there is an ambiguity in the third line. Does the wording need to be clarified?

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

Until the hon. Gentleman raised the matter, it seemed clear to me.

The current rate is 8 per cent., which is in line with the calculation and application of rates in the Utilities Act 2000. There is nothing exceptionally different about the provision. One can, as the hon. Gentleman has done, argue about whether interest should be applied, but it is not unreasonable to include an incentive to pay on time.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I agree with the Minister that it is not unreasonable to have an incentive to pay on time. He will find that 8 per cent. is 4 per cent. over the base rate, which is particularly high for an area such as water payments, where defaulters sometimes do not have to pay their bills and the item is essential. We will not make any progress because the debate is about the amendment rather than the Judgments Act 1838. My amendment has done everything that I had hoped that it would by allowing me to make my points and by instigating the debate. I have no problem with withdrawing it, so I beg to ask leave to withdraw the amendment.

Amendment, but leave, withdrawn.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I beg to move amendment No. 100, in

clause 51, page 65, line 41, at end insert—

'(ab) that the imposition of the penalty was based on an error of law or fact;

(ac) that the amount of the penalty was unreasonable;'.

The nature of this amendment is different because it attempts to clarify and to tidy up the wording. When a mistake has been made, the amendment would ensure that it was rectified speedily.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

The amendment would expand the grounds of an appeal against the imposition of an unreasonable penalty or an error of law or fact. That is perfectly reasonable, but the Bill already covers those grounds for appeal. An error of law means the authority going beyond its powers or non-compliance with the notice procedure. The clause contains detailed procedures on errors of fact, including consultation with a company. That means that errors of fact can be pointed out, and it would be unreasonable for the regulator not to take them into account. If the error of fact were such that it took the matter outside the provisions on financial penalties, it would also be outside the powers of the enforcement authority. With regard to reasonableness, proposed new section 22A requires the penalty to be reasonable—unless, of course, we had accepted amendment No. 84. In opposing an unreasonable penalty, the authority would also be going beyond its powers. The Bill contains those safeguards, and I hope that that reassures the hon. Gentleman.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I am relieved that those matters have been addressed in other parts of the Bill. If the authority imposes a penalty, I wonder whether the interest will also be paid at the rate that we discussed earlier. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I beg to move amendment No. 86, in

clause 51, page 65, line 47, leave out

'or any portion of it'.

This is a probing amendment. If it is unreasonable for the enforcement authority to require the penalty imposed to be paid, why should it unreasonably require any portion of it to be paid? I am seeking clarity on the phrasing.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

I can explain that. As drafted, the clause allows a company to appeal against not only the date for full payment of the penalty but the instalment dates. A company may opt to spread the cost—that is not unusual. The effect of the amendment would be that companies would not be able to appeal against the terms set out for the payment of a penalty by instalments—the length of the repayment or the number and frequency of instalments. In other words, the circumstances in which the company could appeal the spreading of cost would be reduced. The Bill includes a provision for payment by instalments.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

Again, I am grateful for that answer. The Minister's extremely helpful comments satisfy me, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

I have listened to the past few minutes of discussion about whether reasonableness is implicit in the Bill. We had one amendment that took it out of the Bill and another that put it back in. My general point is that, for simpletons like me, it is better that everything is stated in the Bill.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

It is important that a Bill states as much as it needs to in order to be clear about the intentions and circumstances, but it is a difficult problem. If we tried to put in a Bill every single circumstance, exemption and issue for consideration, we would be walking around with volumes the size of the Encyclopaedia Britannica. There must be a balance. A Bill has to be drafted in a way that is clear and not open to misinterpretation, but there must also be an element of flexibility to deal with issues that are difficult to predict. I do not disagree with the hon. Gentleman's general point, but we must be realistic about the way in which legislation is formulated.

Question put and agreed to.

Clause 51 ordered to stand part of the Bill.