Clause 7

Regulatory Enforcement and Sanctions Bill [Lords] – in a Public Bill Committee at 11:30 am on 17 June 2008.

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Guidance to local authorities: enforcement

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

I beg to move amendment No. 2, in clause 7, page 4, line 24, leave out ‘LBRO’ and insert ‘The Secretary of State’.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

With this it will be convenient to discuss the following amendments: No. 3, in clause 7, page 4, line 24, leave out first ‘it’ and insert ‘he’.

No. 4, in clause 7, page 4, line 30, leave out subsection (2).

No. 5, in clause 7, page 4, line 32, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 6, in clause 7, page 4, line 36, leave out ‘(2) or’.

No. 7, in clause 7, page 4, line 37, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 8, in clause 7, page 4, line 41, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 9, in clause 7, page 5, line 1, leave out ‘LBRO’ and insert ‘The Secretary of State’.

No. 10, in clause 7, page 5, line 1, leave out ‘it’ and insert ‘he’.

No. 11, in clause 7, page 5, line 2, leave out ‘it’ and insert ‘him’.

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

I am grateful to the Minister for his remarks on clause 6. They are also relevant to clause 7, so it is helpful to have them on the record.

Clause 7 gives the LBRO the power not merely to offer local authorities guidance, which the Minister referred to, but to direct them. As such, it creates a significant precedent: namely, that a public body that is not directly accountable to this House can direct any of our local authorities in relation to more than 140 enactments. If Committee members have not yet had the chance, it would be worth looking at schedule 3 on page 44, which shows the number of pieces of legislation that we are dealing with. The gamut of legislation ranges widely through employment, criminal justice, the environment, animal welfare, antisocial behaviour, licensing, local government, mining and office arrangements.

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 hon. Gentleman is right that a large number of enactments are listed under schedule 3. It is important to clarify for the Committee that those encompass the key functions of local authorities with regard to regulation. They could be brought together under the headings of trading standards, environmental health, licensing and fire safety. Schedule 3 is the Government’s way of illustrating the enactments that cover the key headings for local authority enforcement. There is coherence in what is encompassed by schedule 3.

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

I am grateful for that information. The Minister is right to say that it is a helpful list. That is why I wanted to draw it to the attention of the Committee. There is a natural assumption that we are dealing with the Bill before us and no other legislation. However, we are dealing with a series of Acts that deal with the involvement of local authorities. My point is that the Bill has wide-reaching implications and that it could undermine local democracy.

The proposal has understandably attracted considerable concern, not least when it was debated in the other place. It was notable that not just peers from my party, but those from all parties represented on the Committee and from the Cross Benches expressed their concern about the potential effect of the Bill. Lord Eccles rightly questioned Ministers about the reasoning behind the unprecedented nature of this step.

For the benefit of the Committee, I will clarify what has happened in this area. As I understand it, to date directions have been Executive orders made by Ministers, usually as a last resort and limited to administrative matters. Those Ministers are directly accountable to this House. I have no problem with that process because it is targeted and accountable.

In response to the criticism of this measure, Ministers in the other place argued that it is not a precedent. They argued that the food Act established the rules in this matter. That Act allows the Food Standards Agency to issue directions to local authorities about the implementation of that Act. To date, the FSA has issued a code of practice concerning EU and UK regulations, but no direction has been issued. Such arguments that have been put forward by Ministers are therefore incorrect.

The food Act is very different from the Bill before us. It permits directions only about the law. The Bill will permit the LBRO to direct all of our local authorities with regard to its guidance. That is a very different matter. In my view the situation is compounded by the LBRO being largely untested as it is a new organisation and its guidance being unpublished. We have no means of judging how its directions might work, yet we are being asked to grant the power in advance.

That brings me to the amendments. In some ways, I would prefer to delete the clause altogether, but we try on the Conservative Benches to be positive and to improve legislation where we can. I am offering the Minister a compromise. Instead of simply scrapping the clause, amendments Nos. 2 to 11 would switch the power of direction back into the hands of the Secretary of State. That would at least create proper accountability, given that the powers potentially affect every one of our local authorities in relation to 140 different pieces of legislation.

This is a positive set of amendments. I look forward to hearing the Minister explain why the power of direction is needed and why, for the first time, a non-departmental public body is being granted such a power in advance.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party 11:45, 17 June 2008

I tabled an amendment to delete the clause, but although the amendments are something of a compromise in transferring the LBRO powers to the Secretary of State, I would be happy to support the  hon. Member for Hertford and Stortford if he decided to press them to a Division. It is fair to say that none of us is happy with giving directive powers to non-elected bodies over elected bodies—in other words, over local authorities.

Clause 6 gives the LBRO the power to issue guidance to local authorities on the exercise of their regulatory functions. Local authorities are required to have regard to such guidance. In addition, every local authority has to have a published enforcement policy, and will be required to comply with the new statutory regulations compliance code, which requires them to exercise their regulatory functions in a clear, proportionate and transparent manner. We therefore believe that clause 7 is not necessary.

If a local authority does not pay due regard to the guidance issued by the LBRO, a range of mechanisms are already available to the LBRO, another local authority or a regulated person or entity in order to hold them to account for any failure. Those mechanisms include legal appeal mechanisms if the failure results in any form of enforcement action, and the corporate complaint procedures that every local authority is required to publish; and there is the independent local ombudsman.

Clause 7 was amended in the other place to add subsection (4), which requires directions that affect more than one local authority to be subject to the negative procedure; it also added subsection (5)(a), which requires the LBRO to consult the local authority that it intends to direct before issuing the direction. Under subsections (2) and (3), the LBRO must obtain the consent of the Secretary of State or Welsh Ministers before issuing a direction.

However, none of those safeguards alters the fact that, because local authorities have to have regard to LBRO guidance under clause 6, the possibility of issuing directions will arise only if authorities have good reason for acting differently. It is most likely to arise if the authority feels that the LBRO guidance runs counter to its statutory obligations. The power could therefore give rise to lengthy legal difficulties over whether its guidance can take precedence over an Act of Parliament.

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 begin by agreeing with the hon. Member for Hertford and Stortford that clauses 6 and 7 go together and are probably best seen in the same light. Our discussion takes me back to the first question that the hon. Gentleman asked this morning, which was whether I and the Government were confident that a relatively small organisation such as LBRO would have the teeth to do the job. That is what clause 7 is about.

One obviously believes that guidance will mostly be observed, but if not the question is whether there should be a power to issue directions in some circumstances. It is intended to be a backstop power that might be used, for example, where one or more local authorities persistently disregard a particular piece of guidance to the detriment of business or the general public.

The LBRO may use the power only with the consent of the Secretary of State or Welsh Ministers and after consultation with the local authorities to whom the direction is being given, any relevant regulator and such other persons as LBRO considers appropriate, including, for example, representatives of bodies such as the Trading Standards Institute or the Chartered Institute  of Environmental Health. Where LBRO gives direction to two or more local authorities, ministerial consent must be given in an order. I believe that that provision came about partly as a result of the recommendations of the Delegated Powers and Regulatory Reform Committee, which was keen to ensure proper procedures for issuing such directions. There was considerable debate on the issue in another place. The clause has been amended to take account of those discussions, and I think that it has been improved by it.

The argument is that the powers are unprecedented and that there is a lack of democratic accountability in how they work. To give a bit of background, we started consulting on them last year. The consultation made it clear that a number of stakeholders were concerned to ensure that the body would have real teeth in carrying out its functions. We proposed the backstop power to be used in circumstances like the ones that I have outlined.

The hon. Member for Hertford and Stortford took issue with the comparison with the Food Standards Agency quoted in this debate. It is not an exact parallel, but it is the closest precedent. Under section 40 of the Food Safety Act 1990, the agency may give directions to a local authority to take steps to comply with a code of practice, much as the LBRO may require a local authority to comply with its guidance. It is also true, however, that the Food Standards Agency has extensive other powers to which LBRO will not have access: for example, the power to audit local authorities’ performance of their functions or even to take over the management of local authorities’ relevant functions directly at the request of the Secretary of State. I am not sure that what is proposed in the measures is a constitutional precedent that goes beyond what happened before. It is important and right that clause 7 should contain safeguards, partly in response to some of the concerns raised.

The use of the powers of direction is subject to the consent of the Secretary of State. The example quoted from the Food Standards Agency is weaker, as the Food Standards Agency must only consult the Secretary of State. That falls short of the strict requirement in the clause to secure the Secretary of State’s consent. LBRO, as I said, must also consult any local authority subject to directions, and parliamentary approval will be required where the directions affect more than one authority.

The amendments tabled by the hon. Member for Hertford and Stortford would transfer the power from LBRO directly into the hands of the Secretary of State. The issue is clearly one of democratic accountability and ensuring that LBRO gives directions to local authorities in a proper way. He believes that that should be done only by an elected person. We believe that the requirement in clause 7 for ministerial consent is an important democratic safeguard. Hopefully, it will have the effect that he wants, which is to secure democratic accountability in the exercise of the power. LBRO will be able to propose directions, but the decision to approve their use will rest firmly with Ministers. From the accountability point of view, the effect would, in the end, be the same because Ministers would effectively be responsible for any use of the directions. However, the amendments would make the provision work in quite a different way because transferring the power to direct into the Secretary  of State’s hands would undermine LBRO’s position as the expert body on regulatory guidance, and would place the Secretary of State in a more active decision-making role. Although he might, of course, argue that it is open to LBRO to give advice to the Secretary of State on when or whether to direct, making the Secretary of State the decision maker would change the way in which LBRO’s role is perceived in practice. Doing so would ultimately undermine the provision, which is importantly and rightly surrounded by proper democratic safeguards.

The provisions in clause 7 are important to enable LBRO to achieve its objective, and sufficient safeguards are in place to ensure that LBRO uses its power to direct compliance with guidance in a responsible manner. The idea of direction has support from a number of groups. I shall quote one or two of them. For example, the British Retail Consortium said:

“In our view, the LBRO should be able to decide the strength of the guidance—i.e. it should decide whether authorities must comply; whether they should have regard to the guidance; or whether it is merely advisory.”

It is not just business groups that say such things; the National Consumer Council has said:

“Although we recognise the concerns of local authorities, we consider this measure is necessary to ensure that consumers do not experience a postcode lottery.”

The Trading Standards Institute has stated:

TSI is necessary that LBRO has the power to direct local authorities that are at odds with central guidance in order to ensure a consistent regulatory environment.”

The CBI said.

“we would welcome moves to maintain the powers of the Local Better Regulation Office (LBRO). Business has been promised a better regulatory environment if regulators are awarded new powers. But this requires regulators to deliver on this, and we think it important that the LBRO is given the appropriate powers to ensure that local authorities do just this. Maintaining Clause 7 as currently drafted, which gives the LBRO powers of direction, would help achieve this”.

So, a significant number of voices are saying not just that there should be a power of direction, but that the LBRO should be the body using that power.

Photo of Judy Mallaber Judy Mallaber PPS (Rt Hon Baroness Ashton of Upholland, President of the Council (Leader of the House of Lords)), Privy Council Office

My hon. Friend referred to the National Consumer Council. Will there be provision for consumer organisations to be consulted as part of the process, because that is not in the Bill? There has been concern that businesses get consulted but that the consumer’s voice does not get heard.

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 certainly possible. I refer my hon. Friend to subsection (5), which states:

“Before giving a direction under this section LBRO must consult—

(a) the local authorities in England or Wales to whom the direction is to be given;

(b) any relevant regulator, and

(c) such other persons as LBRO considers appropriate.”

So, it is certainly open to the LBRO to consult the National Consumer Council—although I do not pretend that that is written in the Bill in every instance.

I am coming to the conclusion of my remarks. I quite understand why both the hon. Members for Hertford and Stortford and for Solihull asked questions about the power for an organisation, such as LBRO, to direct  local authorities. What is the Bill about in the end? It is about ensuring that there are teeth in the better regulation effort at a local level. It is fair for hon. Members to say that with teeth should come some democratic accountability. As drafted, clause 7 meets that democratic test without setting up a system that hampers the LBRO’s work. It contains provisions relating to consultation, and the consent of the Secretary of State, and provisions for consent to be given by order where a certain number of local authorities are involved. That is the balance that we have to strike in the clause.

The powers do have some precedent in the example that has been quoted. I believe that business wants these powers and other organisations such as the Trading Standards Institute and the National Consumer Council have also said that they support them. The amendment would not provide a gain in terms of democratic accountability—that is a fair question to ask, but it is something that we have covered. The amendment might actually make that more difficult to operate, not in everyday situations, but on those occasions when guidance is not enough and it is necessary to exercise the teeth that we began today’s proceedings by calling for.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 12:00, 17 June 2008

It has been a useful debate, but I am not convinced by the Minister’s arguments. He is right to say that the clause has been significantly improved. It was improved in the other place by the efforts of Members of that House and there are certain measures, which he has referred to, that have made it a better clause. However, there remains the question of a precedent. He has only been able to cite one example: the Food Standards Agency. As I have demonstrated, that agency seeks to direct the implementation of an Act, not of guidance, and that is an important difference. Unless he has three other good examples, I have not heard from him where this is not a precedent. We remain clear, therefore, that although the example that has been offered has some relevance, it is not directly the same, and that therefore a precedent has been established.

What about the question of teeth? The purpose of my amendment is not to remove the power to direct—it could be quite legitimately argued that that would remove the teeth. To continue the metaphor, and I shall probably stop it at that point, the teeth remain. I am concerned with how they are harnessed and the accountability. The clause already asks that where the LBRO seeks to make a direction, it goes to the Secretary of State. That does not solve the problem that although that body is accountable to the Minister, it is not accountable us in this House. I understand, therefore, that business will take the view that it does and I do not disagree with that view. Looking at how businesses responded to the Bill, I have a string of quotes here about their concerns about it. The CBI, which the Minister referred to, said on 21 May:

“This Bill requires business to take a leap of faith: it proposes that regulators be awarded additional powers to sanction business in exchange for the promise of a better regulatory environment.”

We could trade quotes as to who is in favour of which bit or whatever; the fundamental question is whether this power needs to be in the hands of an unaccountable non-departmental public body.

For the first time, we have no sight of the guidance that we are supposed to be providing direction powers  for. We are not able to say that this is a long-standing, tried and tested public body that is known to this House, that has established principles and procedures and with which we are familiar. We are being asked in advance to give a body with which we are not familiar, which is not directly accountable to us, the ability for the first time to give directions on its guidance and not on legislation. There is a fundamental difference with any precedent that has been established. On that basis, I am not convinced by the Minister’s arguments and I therefore seek to press the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 8.

Division number 2 Nimrod Review — Statement — Clause 7

Aye: 6 MPs

No: 8 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Clause 7 ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.