Clause 40 - Power to impose monetary penalties

National Security and Investment Bill – in a Public Bill Committee at 3:15 pm on 8th December 2020.

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

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

With this, it will be convenient to discuss clauses 41 to 47 stand part.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

Clauses 40 to 47 cover the civil sanctions under the Bill. I will cover them fairly briefly but I am happy to discuss them in more detail if it would be of interest to the Committee.

It is vital that the Secretary of State has appropriate powers to punish and deter non-compliance with the regime. Should a person breach an order under the regime or fail to provide information or evidence where required, it is vital that the Secretary of State has the power to bring the offender into compliance as quickly as possible to ensure the efficacy of the regime.

Clause 40 provides the Secretary of State with the powers to impose monetary penalties on a person where he is satisfied beyond reasonable doubt that the person has committed an offence under clauses 32 to 34. Clause 40(6) requires the Secretary of State to consider the amount of a monetary penalty to be appropriate before imposing it and it must not exceed the relevant maximum set out in clause 41. The power to impose monetary penalties instead of pursuing criminal proceedings will contribute to ensuring that the Secretary of State has a number of enforcement options to tailor to the situation.

The Secretary of State will not take the power to impose monetary penalties lightly and is required by clause 40(7) to take into account a number of factors, including the seriousness of the offence and any steps taken by the person to remedy the offence in question. I am confident that hon. Members will agree that the clause is valuable in ensuring that the Secretary of State has the appropriate enforcement mechanism to secure compliance with the new regime.

Clause 41 sets out the maximum fixed penalty and, where applicable, the maximum daily rate penalty that may be imposed. The penalties set out here are substantive, and I recognise that they may seem draconian, but they may have to be issued against companies that have significant financial incentive to disregard legal requirements under the regime and put national security at risk by going ahead with an acquisition, so the penalties need to be an effective incentive to comply. I also remind Members that these are maximum penalties; the Secretary of State will have a duty to ensure that any penalty imposed is reasonable and proportionate.

The clause also enables the Secretary of State to make regulations specifying how the maximum penalties applicable to businesses should be calculated and to amend the maximum penalty amounts or percentage rates. It is important that we can adjust any penalties over time, to ensure that they are a sufficient deterrent against non-compliance.

Clause 42 requires the Secretary of State to keep all monetary penalties imposed under review. It also provides a power to vary or revoke penalty notices as appropriate in the light of changing circumstances. Importantly, under the clause, where new evidence comes to light about a breach, it can be taken into account by the Secretary of State, and the penalty notice can be increased, decreased or revoked as appropriate. In all variations, there is, of course, a right of appeal, which is provided for by clause 50.

It is important that both criminal and civil sanctions should be available against offences committed under the Bill, but it would not be appropriate for them to be used in tandem. Clause 43 ensures that parties cannot be subject to both criminal and civil sanctions for the same offence. The clause is vital in giving businesses and other parties certainty and assurance that they will not be penalised in two separate ways for the same offence, which would clearly be unfair.

Clause 44 gives the Secretary of State the power to enforce monetary penalties by making unpaid penalties recoverable, as if they were payable under a court. Failure to comply with a penalty notice would be enforced in the same way as a court order to recover unpaid debts. It also provides for interest to be charged on unpaid penalties that are due.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

I thank the Minister for setting out the provisions of these clauses. Perhaps this is my ignorance, but what will happen to the moneys recouped through the penalties?

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (Digital, Culture, Media and Sport)

That was my assumption, but I know that in certain cases penalties can be used to offset the expenses incurred in creating the regulatory regime, or in supporting companies that are adversely affected, as we discussed earlier.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

I am very happy to come back to the hon. Lady on that point.

Clause 45 ensures that the Government are not unduly burdened with costs relating to the imposition of monetary penalties, which can be expensive. The clause enables the Secretary of State to recover the associated costs from those who are issued with a penalty notice. The amount demanded will depend on the circumstances of each case, but the Secretary of State will need to comply with public law duties in imposing the requirements and in fixing the amount. In particular, the amount will need to be proportionate.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

Pursuant to the intervention of my hon. Friend the Member for Newcastle upon Tyne Central, will the Minister and his Department not only think about, but make a positive decision on, where the penalties go? I have in mind, as he will know, penalties relating to misdemeanours by electricity supply companies.

Those are routinely collected and distributed for good purposes—to keep people’s electricity bills down, among other things. Maybe the Minister will have a similar scheme that could be a good home for those penalties, so that they are turned around and put to good use.

Photo of Nadhim Zahawi Nadhim Zahawi Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), The Parliamentary Under-Secretary for Health and Social Care

I am quite rightly grateful to my brilliant Whip for reminding me that the Bill contains the provision that the moneys be paid into the Consolidated Fund.

Clause 46 requires the Secretary of State to keep cost recovery notices under review and provides him with the power to vary or revoke a cost recovery notice as he considers appropriate. That will reassure businesses and other persons that cost recovery notices remain appropriate. Finally, it is important that the Secretary of State be able to recover the associated costs from those who are issued penalty notices. Clause 47 therefore provides for an effective range of consequences for non-compliance with a cost recovery notice, including the charging of interest, and acts as another important tool in the Secretary of State’s enforcement powers. I hope that the Committee will appreciate the rationale for clauses 40 to 47, which are essential for the effectiveness of the regime.

Question put and agreed to.

Clause 40 accordingly ordered to stand part of the Bill.

Clauses 41 to 47 ordered to stand part of the Bill.