Discretionary requirements

I beg to move amendment No. 42, in clause 42, page 19, line 35, after ‘determine’, insert

‘subject to a maximum amount to be prescribed by order by a Minister of the Crown’.

Amendment No. 42, ironically to clause 42, deals with discretionary requirements and tries to put some form of cap, some maximum limit, on the amount of fine. At the moment, the regulator can impose whatever fine it wishes. There is no stated maximum in the Bill. Given that the regulator has wide powers to investigate, effectively prosecute and be the jury, it seems inappropriate to provide unlimited powers regarding the scale of the fine. There needs to be some appropriateness, not least given the principles that we are meant to be following in terms of Hampton and Macrory. Therefore, the purpose of the amendment is, first, to send that signal. There is a need for the regulators to have a clearly defined limit, but the amendment would allow the Minister to set that limit, and do so by order. There is some flexibility; we have not sought to put a figure on that limit. I would be interested to hear the Minister’s response to the points that underscore the amendment.

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.

My hon. Friend referred to the Macrory report. Does he agree that some of the fines that it quotes for health and safety offences are absolutely shocking? Some businesses have benefited 10 times as much by non-compliance as they have ended up being fined. Any cap on discretionary fines would not enable the necessary discretion to charge a business a low fine where appropriate while ensuring that an organisation doing something completely out of order was not left in pocket as a result of non-compliance.

That is one danger of capping in every case. I am not saying that a cap would never be appropriate in any circumstances, but the amendment  as I understand it would cap in every case. Making the punishment fit the crime, or imposing a penalty appropriate to the gain accrued to a business for its non-observation of the law, is an important and relevant problem.

A list of possible criteria for the variable monetary penalties is set out in page 38 of the guide to the Bill. They include the seriousness of the non-compliance, the business’s disciplinary record and whether the business has taken any action to address the harm caused by non-compliance, and they may differ from area to regulatory area. A business will, of course, be able to raise objections to and make representations about the level of penalty after the notice of intent is issued and, again, will be able to appeal against the penalty if it considers the amount unreasonable. If the tribunal agrees with the appellant, it will have the power to withdraw or vary the penalty imposed.

To sum up, requiring a cap on variable monetary penalties in every case might mean that regulators were tempted back down the road of criminal prosecution. There is no limit on Crown court fines, and many of the offences that we are discussing would be triable in Crown court. We do not want to create an incentive between the two regimes for regulators to favour criminal prosecution in the Crown court, which has no cap, to a system with a cap in every case. I understand the point made by the hon. Member for Hertford and Stortford, but I hope that he will decide on that basis not to pursue his amendment.

It has been a helpful debate. As the Minister rightly said—I think that it is the most important point in the Bill—guidance has already been established. He explored several instances, which I did not notice in reading the explanatory notes, that set out the options available when considering a cap, and not only the options available to Ministers. The Government, rightly, do not reject the principle of a cap but rather recognise the dangers of limitation. I fully understand.

It is also important, however, to bear in mind that the amendments are a symptom of a wider concern. The nature of the system is such that someone whose guilt must be proved against them does not have the option of putting their case before an ordinary court of law, so one wants to make sure that the Government are aware of the dangers in the other parts of the system, hence the amendment and some of the previous amendments.

My purpose in tabling the amendment was to establish exactly what the Government’s view of the caps was. They clearly accept the need for caps in certain cases, and I agree, but on balance, I think that the Minister is probably correct to say that it would be a mistake to write a statutory, narrow and strict requirement into the Bill. That is a perfectly reasonable argument. It has been a useful debate, and on that basis I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

The clause is important. We covered some of the ground during debate on amendment No. 42, but clauses 40 and 49 are about fixed monetary penalties. This clause is about discretionary requirements, and,  again, expands the suite of options available to regulators in trying to ensure compliance with the law. Subsection (2) requires the regulator to be satisfied beyond reasonable doubt that a person has committed the relevant offence before imposing a discretionary requirement. The discretionary requirements themselves are set out in subsection (3) and include variable monetary penalties, which we have just discussed; compliance notices, which are notices requiring a business to take steps within a time period as may be specified to ensure that the instance of non-compliance does not continue or recur; and restoration notices, which are notices requiring a business to take steps as far as possible to restore the position to what it would have been had the non-compliance not taken place.

Many of us, when we talk to local enforcement officers, will recognise this and see the sense behind it. Most enforcement officers I have talked to do not want to go around fining everybody and taking everybody to court and issuing penalties right, left and centre. What they most want to do is ensure compliance, and sometimes that just means restoring the position to what it would have been had the non-compliance not taken place.

Discretionary requirements are aimed at addressing offences where a greater degree of flexibility may be required in order to sanction the offence appropriately. This may be more suitable in more complex cases of non-compliance, where there are a number of different effects and consequences that need addressing. For example, if a business has spilled toxic waste or chemicals on parkland, a regulator might want to impose not just a fine, but a restoration notice to order the business to restore the position to what it would have been had that offence not occurred. The regulator may also want to impose a compliance notice to make sure that a business takes steps to ensure that the offence does not continue or reoccur. If the business has clearly gained a benefit from failing to comply with regulations, the regulator may in addition want to impose a variable monetary penalty. In the public interest, this gives regulators a greater variety of options to ensure not just that monetary penalties are imposed, but that action is taken to rectify the initial breach of the law.

Subsection (4) prohibits a regulator from imposing a discretionary requirement upon a person on more than one occasion in relation to the same act or omission, and subsection (6) goes back to our discussion about summary only offences, which are capped, and the maximum fine available to the magistrates court is usually £5,000.

Discretionary requirements will allow regulators to deal with instances of non-compliance in a more proportionate and targeted way, and the clause is very  important in carrying forward the recommendations made by Professor Macrory for more flexibility and proportionality in the system.

Question put and agreed to.

Clause 42 ordered to stand part of the Bill.

Clause 43 ordered to stand part of the Bill.