New Clause 2

Regulatory Enforcement and Sanctions Bill [Lords] – in a Public Bill Committee at 1:45 pm on 19 June 2008.

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‘This Act and any order made under it shall by virtue of this section cease to have effect on 1st January 2014.’.—[Mr. Prisk.]

Brought up, and read the First time.

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

I beg to move, That the clause be read a Second time.

Having concluded the clauses, we come to the new clauses. New clause 2 is very important because, as you will have seen, Mr. Chope, it is a sunset clause. As we have discussed, the scope of the Bill is quite significant—technical, yes, but significant none the less. It creates an entirely new local regulatory system and an entirely new non-departmental public body, albeit there is a company in shadow at present. It provides extensive powers of sanction and enforcement, involving not one single regulator but 27; and not one piece of legislation but over 140 different laws. The Bill permits the Secretary of State to make, by order, important changes to both the current and the proposed system of local regulation. That means, I hope, that in all local authority areas we, as Members of this House, will see the potential for improvement in the regulatory environment. However, those changes will affect all our constituents.

In the other place, my noble Friends were able to secure some important concessions, not least that of a three-year review under clause 17 that covers only the LBRO. Given that the LBRO is not, as we have debated, directly accountable to this House, it was right to seek that review. However, clause 17 and the review contained therein does not apply to the whole Bill and that is why  it is important to insert the means to debate whether this legislation should persist after a five-year period.

New clause 2 offers a number of important advantages to us as a House. It enables us to assess the whole Act and look at how it has worked in practice. The Minister has understandably looked at the different parts of the Bill in detailed consideration during our deliberations today. However, we can all see that the sanctions regime, the operation of primary authorities and the LBRO’s new and interesting range of powers will not only work in themselves, but will work together. It is difficult to know what the end result will be—it is untried and untested and we cannot be certain about it. The LBRO is not a long-established, familiar organisation that we can judge on its performance, powers and role.

The new clause would allow us to look in particular at the range of sanctions and their impact, especially on small businesses. It would help to focus—this is an important benefit, which the Minister referred to earlier—all the regulators’ minds on their performance not only in the coming year but over the next five years. They would know that we reserve and have the power to scrutinise the legislation in full. The insertion of a sunset clause is not a cheap excuse for getting rid of a piece of legislation without due thought. It would enable the House to ensure that the law of the land is working. The legislation provides significant changes for our constituents.

Rightly, the Government have said that they want to get serious about regulation and reducing the regulatory burden, which I welcome. The new clause provides an opportunity for them to turn that promise into practice.

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

I welcome the prospect of a sunset clause. Earlier in the proceedings, I got a bit excited when I interpreted the three-year review of the LBRO as a sunset clause. On new clause 3, I would suggest that six and a half years is too long a period, but I would welcome a sunset clause proposal. Based on costs of £4.5 million per annum, we would have spent £29 million before the clause would be invoked. That is too much and too long a prospect. A three-year sunset clause would be extremely welcome, and I would also welcome the Minister’s views on how we might go about imposing such a clause not only on this Bill, but on other Government Bills.

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

Let me begin by saying that sunset clauses are perfectly legitimate issues to raise. They are not always inappropriate by any means, and they have been added to a number of Bills, so, on a basic level, it is legitimate to consider them. However, in relation to a Bill such as this, such a clause is unwise, and I shall set out my reasons for so thinking.

The Bill intends to change the regulatory environment to deal with two significant problems, as we have said. The first problem is an inconsistency in the manner in which regulations are applied around the country, which is essentially dealt with in parts 1 and 2. The second problem is the inflexibility in the penalty regime, which is dealt with in part 3.

Business appreciates clarity and certainty, and the Bill intends to give those things. I fear that the insertion of a sunset clause such as new clause 2 would do precisely the opposite. Businesses and other regulated  organisations need confidence and certainty when making decisions that the regime that is being implemented will be there for some time. To begin from the premise that the Bill will lapse in the period set out in the clause would damage the Bill, not only at the end of the period, but through its period of operation.

For example, uncertainty about the continued existence of LBRO would make it difficult for it to carry authority and trust. Businesses would think twice about entering into primary authority relationships. We have debated how important those are in ensuring consistency and clarity for businesses a lot in the past few days. If businesses thought that the legal basis for the relationship would be abolished after five years, they would think twice about investing time, and indeed money, in them—there is a cost recovery provision. Would they know that the advice that they had received would hold good in future? That could be a problem. Local authorities would also have a reduced incentive to comply with the guidance of a body that Parliament has said has a time-limited life.

On part 3, for example, when we think about the penalties that we have discussed in some depth, as we approached the sunset point regulators might stop issuing sanctions because their capacity to do so was coming to an end, and they would rely again on the one-club policy of criminal prosecution that the Bill tries to get away from. Regulators would have little incentive to take up these powers, in the knowledge that they would be withdrawn after a period of time.

A review clause is different. It states that we will look at how the system is operating, but it does not say that it will come to an end, as a sunset clause does. Regulators adopting the powers in 2010 would find themselves in the position of having to submit to a review clause after three years, an exercise with doubtful effects in view of the fact that if the new clause became part of the Bill, Parliament would have legislated for the whole regime to go out of existence two years later anyway. For a number of reasons, that is unwise.

A similar clause was debated in the other place too. I am not against review; it is a perfectly sensible thing to do and it is built into the Bill, but that is different from the automatic ending entailed in a sunset clause.

We have had a lot of representations on this issue. If I may detain the Committee with a few of the quotes on the issue, it may give an idea of the strength of feeling about consistency and clarity. The Federation of Small Businesses said:

“The FSB...has invested a great deal of time and effort in pushing for the establishment of the LBRO. It would be sad to see a sunset clause applied to the LBRO as this would severely impact on its ability to function in the interest of 4.5 million small businesses.”

Going from small business to a larger national chain, Boots said,

“the LBRO benefits of the Bill will be lost with the result that industry will be left still dealing with the inconsistencies that Government promised would be addressed by this new approach to regulatory coordination.”

Sainsbury’s said:

“The introduction of the sunset clause will, we believe, make the role of the LBRO more difficult and potentially prejudice its ability to bring about the change which is required.”

There are other comments here and I could go on, but I shall not quote all of them. Finally, the CBI said:

“Sunset clauses in principle are a good tool to ensure that regulations are fit for purpose and deliver their objectives. But we feel that the specific addition of a sunset clause would not materially add value in the case of the RES Bill... such an amendment could reduce the LBRO’s ability to implement its goal of improving the quality of local authority enforcement.”

So I think we can see a broad opposition to the new clause, both among organisations representing small business and some well-known big businesses. For those reasons, I hope that the hon. Gentleman will not press the new clause.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 2:00, 19 June 2008

I am interested to hear some of the quotations. There are other quotations from other similar organisations, not specifically on the sunset clause, but on the measures that the Bill represents. The CBI says that the Bill represents for business a “leap of faith”. We need to be careful, therefore, about how we selectively quote what different organisations think.

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

Would the hon. Gentleman accept that the quotes that I read out are specifically related to the sunset clause, and the quote that he has read out is not?

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

Absolutely. Equally, in the end we have to decide whether what we do in this House is right. I am always happy to listen to the business audience and ensure that their concerns are accurately represented, as I have done in the past two days, but in the end we must make sure that this House reserves its right to consider these matters without due prejudice. I want to ensure that we do that properly.

The point about a sunset clause is not the presumption that we will remove the Bill; it is to provide a point when it can be replaced, removed or renewed. I suspect that the good elements, which businesses clearly wish to see maintained, would be renewed. A sunset clause is not final: it may be the end for the Bill, but it may not. It allows Parliament to consider whether what is on the statute book is working.

I accept that it is difficult to strike the right balance, and have said on a number of occasions that parts of the Bill have considerable merit. I welcome many of them, but I am sceptical whether others will achieve what the Government hope. I suspect that we share the hope for a better regulatory environment, but should the regime be permanent or, after reviewing particular elements of the Bill—but not all, because we do not have that opportunity—should we have the option of annulling it on 1 January 2014, which after all is some distance off?

With respect to the organisations that the Minister mentioned—I know them well—I do not buy the argument that the fact that there might be a review in Parliament of the Bill means that no one will make a deal or memorandum of understanding with a primary authority for the next six years. Neither do I buy the Minister’s argument that the LBRO will struggle to survive or fulfil its functions, if on 1 January 2014 Parliament has the opportunity to reconsider how the legislation is operating. I fully accept that we will want to consider that carefully, and it might well be that a future Government at that point would wish to enhance, or even improve,  this legislation. I suspect that that would be well within the reach of future Governments upon consideration. At the moment, the House will have no means of considering it after Third Reading. That will be the end of the matter. There will be a review—that is fine—but only on specific elements and orders. That is why this new clause is so important. I am not convinced by his comments, so I wish to press the new clause to a Division.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 5, Noes 8.

Division number 5 Nimrod Review — Statement — New Clause 2

Aye: 5 MPs

No: 8 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.