Clause 5

Regulatory Enforcement and Sanctions Bill [Lords] – in a Public Bill Committee at 11:15 am on 17 June 2008.

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Objective relating to general functions

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

I beg to move amendment No. 1, in clause 5, page 3, line 37, at end insert—

‘(d) in accordance with any Code issued from time to time under Section 22 of the Legislative and Regulatory Reform Act 2006 (c. 51).’.

Amendment No. 1 would insert a new paragraph (d) to clause 5. Its purpose is expressly to include Hampton principles in the LBRO’s objectives. The reason goes back to the origins of the Bill, namely, the Hampton review of regulatory enforcement. The principles include co-ordination, consistency of regulatory enforcement, a risk-based approach—targeting the rogues and not the individual who has made the odd error—and, most important, securing compliance with rules rather than just chasing prosecution. Those principles are supported by Opposition Members and by many businesses. Indeed, the amendment has the support of a number of businesses and their representatives, including the British Retail Consortium. Although I appreciate that subsection (2) lists some of those principles, it is neither explicit nor complete. The amendment would strengthen the clause, and I look forward to hearing the Minister’s reply as to why he thinks the reverse, or whether in fact he is only too delighted to accept the amendment.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

I am happy to support the Conservative amendment. It seems a sensible way of strengthening the intentions 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

Clause 5 is important as it sets out the principles of better regulation to which the LBRO will have regard. As the hon. Member for Hertford and Stortford mentioned, subsection (2) sets out its functions stating that

“regulatory activities should be carried out in a way which is transparent, accountable, proportionate and consistent...targeted only at cases in which action is needed”.

Those of us with history in such debates are familiar with those five principles, which have become an important part of the policy framework regarding better regulation. The amendment deals specifically with the regulators compliance code, recently issued under section 22 of the Legislative and Regulatory Reform Act 2006. The scope of the code in respect of local authorities coincides closely with parts 1 and 2 of the Bill. It applies to local authorities in their exercise of trading standards, environmental health, licensing and fire safety functions. The LBRO will, therefore, take an interest in the performance of local authorities when delivering its duties under the code.

However, including a provision in the Bill that requires LBRO to ensure that local authorities act in accordance with it could cause confusion for businesses and local authorities. Although I understand the intention behind the amendment, its effect would be to place local authorities under two contradictory legal obligations. The provisions in section 21 of the 2006 Act and the legislative and regulatory functions order under which the code was issued, require local authorities to have regard to the code. Legally, that means that in certain circumstances, a local authority can take the code into account but decide not to apply it.

Amendment No. 1 would require LBRO to ensure that local authorities act in accordance with the code. Under that requirement, the circumstances in which a local authority could decide not to apply it are limited almost to none. It would be undesirable to have those two contradictory legal requirements running side by side.

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

I would like to clarify something. Subsection (2)(b) says

“regulatory activities should be targeted only at cases in which action is needed”.

Is it the Government’s intention—this may be helpful in the debate, certainly to those who are concerned about the matter—that the measure would seek to implement the full Hampton-compliant, risk-based approach?

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

Certainly, these are known as the Hampton principles. They are an important guide for regulators and Government in framing regulation. My point and, to use more colloquial language, the Government’s view is that subsections 2(a) and (b) cover what should guide the functions of LBRO under the clause. Our problem is that amendment No. 1 would have local authorities not only having regard to LBRO, but acting in accordance with it, which would present them with two potentially contradictory legal requirements running side by side. It would require them to do that bit more by amending the objectives of a different body altogether. I am not sure that is the best way to legislate.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 11:30, 17 June 2008

Is the Minister saying that the Government believe that, together, subsections (1) and (2) would require local authorities to be wholly compliant with Hampton? Is that correct or not? If it is correct, it would be immensely 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

The provision requires local authorities to conduct their business according to the five principles set out in the clause. I hope that I have been helpful to the hon. Gentleman.

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

I think that we have got there in the end. The purpose of the amendment was to establish explicitly what would happen. I fully understand that subsection (2)(a) on the key points of transparency, accountability, proportionality and consistency is important, but the risk-based issue is unclear under subsection (2)(b). Several businesses that will be affected by the provision have wanted matters clarified. The Minister may have just provided that clarity, and I am grateful to him for that. In a charitable sense, I say that the hon. Gentleman has made progress by covering such matters, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

I beg to move amendment No. 49, in clause 5, page 3, line 42, at end add—

‘(c) regulatory activities should be carried out on the basis of a risk assessment of the regulated person which should include their propensity to comply with the regulation.’.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

With this it will be convenient to discuss amendment No. 50, in clause 13, page 7, line 9, at end add—

‘(c) regulatory activities should be carried out on the basis of a risk assessment of the regulated person which should include their propensity to comply with the regulation.’.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

The Hampton review recommended that all regulatory activity should be based on a clear, comprehensive risk assessment. The LBRO should have the power to ensure that any sanctions or inspections should follow a risk assessment via the regulator or local authority. If they target those that present high risks, it would give more freedom to target rogue traders. It would free up resources and it would reward compliant companies with a light-touch regime, which is the reasoning behind the amendment.

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

We are in similar territory to that of the previous amendment. Under clause 5, LBRO is required to secure that local authorities exercise their functions in a way that is effective, does not give rise to unnecessary problems and complies with the five principles under subsection (2) that we discussed a moment or two ago. They are the principles of better regulation, which inform policy in such areas, and they are becoming increasingly integrated into the legislative framework for regulators. They feature, for example, in Ofcom’s primary legislation and many regulators are required to have regard to them under the Regulatory Reform Act 2001.

I agree with the hon. Lady that the assessment of risk should be at the heart of regulatory activity, but so should many other commendable practices, such as giving clear advice to those who are subject to regulation and others, too. I am not sure that it is wise to single out this particular issue when the principles of good regulation already address the point. In particular, subsection (2)(b) says:

“regulatory activities should be targeted only at cases in which action is needed.”

The key ideas behind the five principles are probably targeting and proportionality, reflecting the view that regulation should be based on an assessment of risk. The Better Regulation Task Force publication “Principles of Good Regulation” expanded on the principles and on the best means of implementing them in practice. The guidance covers the issues raised in the amendments, and it may help the hon. Lady if I quote from it. The guidance says that targeting, for instance, demands that enforcers should

“focus primarily on those whose activities give rise to the most serious risks.”

The issue is therefore covered in Government guidance.

The inclusion of the principles in clauses 5 and 13 deals with the issue raised in the amendments and makes them unnecessary. I hope that that gives the hon. Lady some reassurance that a risk-based approach is very much built into clause 5.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

I am grateful to the Minister for his explanation of where else in the Bill I should seek reassurance that the risk-based approach is included. With that reassurance, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.