Clause 31

Regulatory Enforcement and Sanctions Bill [Lords] – in a Public Bill Committee at 4:30 pm on 17 June 2008.

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Power to charge

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

The clause is important; it is about the power to charge—a point we touched on this morning. It states:

“The primary authority may charge the regulated person such fees as it considers to represent the costs reasonably incurred by it in the exercise of its functions under this Part”.

The provision recognises two important points. The first is that there are costs in acting as a primary authority. The primary authority is, in effect, acting as an advice broker, both to the business and to other enforcing authorities. Secondly, it helps to address the concern of some small business organisations that primary authorities might devote whatever expertise they have in regulatory enforcement to dealing solely with the concerns of multiple-site, rather than single-site businesses. In that respect, clause 31 makes provision for a primary authority to recover the costs of carrying out its functions under part 2 from the business for which it is acting as a primary authority.

The clause also provides that a primary authority may charge only for costs that it has reasonably incurred and does not, therefore, allow a primary authority to profit from its functions under part 2. Furthermore, where a primary authority chooses to charge a business, it must have regard to the relevant guidance issued by the LBRO under clause 33.

As I said, small businesses welcome the power to recover costs and can now confidently expect a local authority that takes on the primary authority role not to divert resources away from the advice and support that they look to it to provide. One might ask why businesses should pay for that service when they already pay their business rates. However, participation in the primary authorities scheme will give businesses access to a range of services over and above those available to businesses in general.

The provisions in clause 31 are important to the functioning of the primary authorities scheme and respond to some of the concerns about costs raised by Hertfordshire and other councils.

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

This is an important clause, not least because it goes to the heart of several of our debates.

Hertfordshire may have been considering the Bill as it was before we debated it today, but the council was clearly concerned about the due costs, which we debated  before lunch. Clearly, it has been decided that those costs will now be met by business, rather than through an adjustment within local authorities, which I am sure will please the Chancellor. I can understand the reasoning behind that decision, and there is an argument that the person who benefits from a service should contribute towards it. However, that raises the point—to return to an earlier debate—that only multi-site businesses can benefit from the primary authorities scheme, which provides quite a beneficial service for them to tap into. There is therefore a regulatory distinction between the businesses that can nominate primary authorities and the single-site small businesses that cannot. It is important that we bear that in mind.

On the specific point about the power to charge, the clause says that fees must

“represent the costs reasonably incurred” by the authority, and that phraseology is perfectly acceptable. However, although the arrangements seem fair on the face of it, there are concerns, and I want to tease out a further response from the Minister.

The purpose of the Bill is to improve regulatory standards for businesses, principally by enabling them to nominate a primary authority as their sole local regulator. As the Minister said—almost in anticipation of my point—some businesses will say, “Hang on a moment. We’re already paying corporation tax and a range of other things.” They are paying their national non-domestic rates, or business rates as they are better known, so what are they paying for in addition? The CBI is not alone when it says:

“We do not see a compelling argument for why business should apply additional sums or why there should be a net increase in costs.”

The CBI’s essential point, which is not unreasonable, is that although it wants better regulation, why must business pay for what the Government should deliver anyway? That is a perfectly good point, and I would be interested to hear the Minister’s response.

My final point, which is just as important, is who will decide that a primary authority is making reasonable charges—to use the language of the clause? Will the LBRO be able to intervene or will it be the Secretary of State?

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 has given me the opportunity to refer to the impact assessment for the Bill, which details some of the costs and benefits. Referring to it will perhaps help to answer his question about what the benefit in all these things will be.

As ever with impact assessments, we are talking about an assessment. The purpose of the Bill is to review all the issues in three years, but the assessment of benefits to business from, for example, consistency of advice could be anything from £24 million to £48 million. Consistency of risk assessment could be anything between £3 million and £5.8 million and savings from more effective priority setting provision of guidance could be up to £32 million.

So there are substantial potential cost benefits to businesses from a regime under which the advice is more consistent and they are more certain that they can, for example, introduce more product lines, knowing  how that might be judged in different parts of the country. Although cost recovery has been built in, to ensure that the primary authority principle does not become too much of a burden to the local authorities that take it on, there is still substantial benefit—in fact, far greater benefit—for businesses in having this regime than in not having it.

The hon. Gentleman asked who would determine the charges and who would judge whether they were reasonable. I fear that, on that question, I may have to come back to him or write to him.

Question put and agreed to.

Clause 31 ordered to stand part of the Bill.