Clause 22

Regulatory Enforcement and Sanctions Bill [Lords] – in a Public Bill Committee at 12:15 pm on 17 June 2008.

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Scope of Part 2

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

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

It is probably prudent to pause for a moment at this point to talk about part 2 of the Bill, to which clause 22 takes us.

So far we have discussed the establishment of the LBRO. We have discussed its powers in relation to advice and guidance to local authorities; we have discussed the make-up of its board, payments to its members, and so on. Part 2 takes us into slightly different territory: its  application to regulated persons that carry out an activity in two or more local authorities. This speaks to the very heart of the Hampton report.

We began this morning’s deliberations by talking about two issues identified by the report as problems in the regulatory system as applied at a local level. One of those problems was inconsistency and the other was inflexibility. Inconsistency is at the heart of part 2 of the Bill. Clause 22 limits access to the primary authority scheme to persons—be they business, charity or other organisation—that are regulated by more than one local authority. The intention is to include multi-site retailers and businesses that operate indirectly across local authorities, including, for example, internet sales operations and manufacturers whose goods are sold by another party in a number of local authorities. It will also include some franchises, where the franchisor has extensive control over the compliance standards of its franchisees.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

If an internet business is based offshore, but trades across that, would I be right in assuming that it would not be incorporated?

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

My instant response is that he would be right. This can be directed only at businesses that operate in the UK. It is, however, intended to cover businesses that operate in a number of different local authority areas in the UK.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

The Minister said “the UK”. If we had a business in Aberdeen, would the point I made be the same? My understanding is that this is principally to do with England and Wales. Will the Minister clarify that?

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

That is not quite right. Part 2 of the Bill has a different territorial scope from part 1, and the business in Aberdeen would be covered by part 2 of the Bill, although it would depend to an extent on whether the regulatory function was a reserved or a devolved matter. We may debate this at greater length if the hon. Gentleman wishes, but on the basic point of territorial extent, part 2 of the Bill extends to Scotland and Northern Ireland in a way that part 1 does not.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I do not necessarily need to delay the Committee by deliberating on the matter, but if it were the Government’s wish to clarify it at some point in due course, perhaps in writing, members of the Committee and those seeking to understand this legislation might find that helpful. There is a danger of a little lack of clarity, and while I appreciate that a response may not be at the tip of the Minister’s tongue, it would be helpful.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I am happy to do as the hon. Gentleman asks, but I will also point him to clause 24, which defines “relevant function”, and under subsection (3) states:

“An order under subsection (1)(b) may not specify a regulatory function so far as exercisable in Scotland, if or to the extent that the function relates to matters which are not reserved matters.”

There is a similar provision for Northern Ireland. So there is clarity in the Bill in terms of its territorial scope.

I would also refer him to the—hopefully helpful—guide to the Bill produced by the Department, where on page 7 the territorial scope is very clearly set out. It says that part 1 applies only to England and Wales, and this means that LBRO may issue guidance to which local authorities in both England and Wales must have regard. Parts 2, 3 and 4 apply in England and Wales, and there are specific procedures for matters in Wales in respect of which Welsh Ministers exercise functions that we have touched on. Parts 2, 3 and 4 also apply in Scotland in respect of matters that are reserved, and in Northern Ireland in respect of matters that are not transferred. The Bill therefore has a significantly different territorial scope in parts 2, 3 and 4, compared with part 1. I hope that that clarifies the situation; it is set out in both the guide and the Bill.

May I return briefly to clause 2? As I was saying, the clause and part 2 in general, set out the relationship that we wish to establish between multi-site businesses and the local authorities that regulate them. We shall come on, I am sure, to discuss primary authorities, enforcement authorities, and LBRO’s role in ensuring that that relationship works as smoothly as possible. This is a difficult area that was at the heart of Hampton. We are trying to ensure consistency in enforcement in a way that respects both local authority and, in a way, ensures that businesses get the clarity that they desire from the regulatory system. This is attempting to address the problem of inconsistency, which was a very important point emphasised by Hampton in his report.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I am grateful to the Minister for those remarks, which I hope will clarify matters for those whom they will affect. The Minister is right to say that part 2 of the Bill, of which clause 22 is the first clause, seeks to aid businesses that trade in more than one local authority area. The most obvious example of the national business that we would think of is Tesco, which trades in hundreds of local authority areas, and has to cope with a wide variety of different approaches, not just the nature of the rules, but the way in which they are implemented. Understandably, that creates significant difficulties for such enterprises. It is that lack of consistency that the Government are absolutely right to try to address.

I have one fundamental difficulty with that, with which I hope that the Minister can help, although I suspect that the Government have struggled with it. That is that there is an unintended consequence of this, which affects most UK businesses. As the Bill is currently drafted, it would in effect create two regulatory environments: one for multi-site, larger businesses—the Tescos of this world—and one for the small, independent family businesses trading from a single location. Multi-site businesses will be able to select a primary authority, and in doing so, would hopefully have the intention of ensuring that they enjoy a better regulatory environment.

One single example—let us take Tesco—would be that its chief executive would, quite naturally, want to move on from the current local authority arrangements, and would identify what they regard as the most efficient local authority. It might be Wandsworth, or it might be, as its headquarters currently lie, in Hertfordshire. That is not far from my own constituency. What would happen is that the Tesco chief executive would say to the local authority chief executive, “Let us have the  most efficient, streamlined, best possible arrangement that we can have.” Quite understandably, the local authority would look at that as an opportunity to set its standards, and would be very keen to oblige.

Meanwhile, the small independent retailer in one site would be stuck with its own authority. In good local authority areas, that would not necessarily really matter. However, what about those people who are stuck in Haringey, or—dare I say it?—the city of Liverpool, not because they are unpleasant areas, because they are delightful and charming areas, but because there is a concern there about the efficiency of their regulators?

Locally, it could mean that on the high street, a small independent retailer has one regulator, but Tesco enjoys a streamlined super-duper, all singing, all dancing, and efficient regime. In other words, there is one law for the big chains, and another for small family businesses.

I am characterising it in reasonably simple language, but it is important to look at the potential unintended consequence. The Minister will, quite rightly, have realised that the critical issue of the clause—as I am sure you will have spotted, Mr. Chope—is consistency. It would be quite right to say, “Mr. Prisk, the lack of consistency that you are suggesting is utter drivel, because if you are on one site only, perhaps consistency will have been achieved.” However, it may be consistency of bad regulation that that business has to suffer.

What I want to explore with the Minister is: what consideration have Government given to what this could mean, not least given the very great pressure on small businesses on our high streets, and the competition that they face from the larger supermarkets? How are small businesses meant to benefit from this measure? What, in the Government’s view, are the options available to them if they find themselves at a disadvantage? There may not be a huge disadvantage, but in competitive terms every incremental difference matters. In regulatory terms, if one small family business were at the behest of the clipboard mentality, while Tesco just up the street was enjoying a much lighter, better regulatory environment, there would an injustice that I am sure the Minister would wish to address.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I should like to make a couple of points in response to the hon. Gentleman’s questions. I am sure that I detect no tone of partisanship in his citing Tesco, given the warm relationship that he enjoys with his local authority.

The current discussion takes us into an interesting area in respect of whether we can criticise any legislation for not doing a job that it is not intended to do. The principle of part 2 is to do with ensuring consistency for multi-site businesses. Let us pursue the example of Tesco, since we are on that subject. Tesco operates in most, if not every, local authority area in the country. There is a particular need for clear enforcement advice in respect of such a national, well-known chain. The shop on the corner operating in one local authority area only needs clear advice, but of a different kind, because it does not face the same issues that arise with a chain of outlets, where conflicting advice may be given between one local authority and another. I am not sure that the hon. Gentleman is comparing exactly the same situations.

The hon. Gentleman suggests that there might be something in the Bill for big business, but asks, what is in it for small business? I would not want small businesses to think that there is nothing in the Bill that would benefit small business. Under schedule 3, with its long list of enactments under the different headings dealing with trading standards, fire and safety, and so on, LBRO will be promoting better regulation across all those fields, regardless of business size. If that helps to lighten the burden of regulation, it will help businesses, large and small.

Many businesses are in between the size of Tesco and the single, family-owned corner shop. For example, a car dealership with outlets across the four boroughs of the black country is not a national outfit, like Tesco, but it might welcome the consistency of advice across three or four quite closely linked local authorities. To local government’s credit, there are existing examples of that. The hon. Gentleman mentioned Liverpool. If memory serves me correctly—I am sure that Committee members will correct me if it does not—on the trading standards front there is quite a successful partnership involving authorities in the Merseyside area, where something like that is already happening. There are benefits to small business and the national chains and to those in between with, for example, half a dozen or so outlets.

We have traded a few quotes today. The Federation of Small Businesses has welcomed, if not pressed for, the creation of LBRO. I hope that this measure benefits small businesses. However, part 2 of the Bill is not designed to do a different job from the one that I set out; it is about consistency for those business organisations or others who operate across a number of local authorities and seek the right set of relationships to ensure consistency. I am sure that we will soon discuss primary authorities, enforcement authorities and how things are to be done.

Question put and agreed to.

Clause 22 ordered to stand part of the Bill.

Clauses 23 and 24 ordered to stand part of the Bill.