Regulatory Enforcement and Sanctions Bill [HL]

My Lords, the noble Baroness, Lady Wilcox, and the noble Viscount, Lord Colville, have done a fairly effective hatchet job on Parts 1 and 2 of the Bill; I shall try to do a hatchet job on Parts 3 and 4. I speak as one of the big five regulators, as chief executive of the Environment Agency. I have also led a smaller regulator and have been involved in a range of businesses that have for their part been regulated. I hope that my track record speaks for itself in that I have helped champion the cause of better regulation in this country for almost 10 years. I was dead keen on the Bill when I first saw it because Philip Hampton did a very good job in his report and Richard Macrory did excellent work in devising a much more flexible range of penalties. Indeed, we were anxious to get the legislation through as quickly as possible so that we could get our hands on these penalties because, along with business, I believed they would be much more flexible and apt. Many businesses get seriously fed up of waiting considerable periods of time to be prosecuted for an offence that they know they have committed. It is a fair cop and they simply want the penalty to be applied and to move on to a better performance level. They would like these faster, more flexible, penalties. It was all looking rather splendid until we received the greater detail of the Bill following consultation. There it was clear that the Bill had been considerably hijacked. In fact, the hurdles that are now in the Bill—I am referring to Part 3 on access to the new flexible penalties—are so high that they are almost unscaleable. First, regulators have got to be Hampton-compliant. We all want to be Hampton-compliant, so I am sure that is not a hard job. But they then have to get their sponsor body to agree that they should have access to the penalties; they have got to get cross-government departmental approval; the matter has to go to consultation and, if there is any significant change in what has been proposed, it has got to go to re-consultation. To be frank, at the end of all that one might well lose one’s will to live. If one does get access to the penalties there is then a process of implementation. This will be no small job. Staff throughout organisations, particularly the larger organisations—and, indeed, in local authorities, where there are many of them—will need retraining. It will be a big job resetting procedures and bedding this in so that the penalties are used effectively and properly in line with the guidance that is going to be issued with the Bill, and also in line with the Hampton principles. Alas, at three years there will be a review of how the regulator has operated those penalties. I suspect that at the end of the first three years it will be unlikely that most regulators will have fully bedded-in the implementation of these penalties because they are very complicated and will take some time to settle. At that point, if more than one example of falling from grace is given—although I gather that the guidance that has recently been issued with the Bill makes this slightly less severe—you could find as a regulator that you are having the penalties removed from you as a mechanism you can use. It is like the Grand Old Duke of York: you march your men up to the top of the hill and then you march them back down again. There are other problems with the penalties regime. I was interested to hear that the CBI and the British Retail Consortium were not keen on the costs that can be raised for some of the penalties. Certainly the regulators’ anxieties are that if costs cannot be raised for the fixed monetary penalties or for the enforcement undertakings, it simply will not be financially worth while for them to apply those penalties because they will not be refunded for their work in doing that. Generally speaking, I would not be alone among the major regulators in saying that the range of bureaucratic controls that have now been put around access to those penalties are so large that, frankly, I doubt whether many of us are going to rush to apply for them. That is a shame because Richard Macrory’s propositions were good ones and would make a major contribution to better, more risk-based, more proportionate, more light-touch and faster regulation for many businesses in this country. Part 4 is a late player in the game. It was not in the Bill when the first consultation went out, so it has not had the benefit of the 12-week consultation before anything came into being that the Minister boasted of as being so admirable. That was not the case with Part 4 with regard to how it impacts on the regulators. For me it was not, as the noble Baroness, Lady Wilcox, said, like ““Yes Minister””. I found that Part 4 was more like Alice Through the Looking-Glass. It is what I would call the nuclear option. Basically it says that if regulators are so naff that they are deemed to be failing, they will be put in special measures. They will then have to demonstrate on a continuous basis that all the regulations they apply do not involve unnecessary burdens. I do not want to quote from the Environment Agency because I am speaking here in my rounded right as having come from a range of backgrounds, but in the case of that agency it would mean reviewing 160 regulatory regimes on an annual basis and trying to prove a negative—that is, no unnecessary burdens—in the absence of any definition, as the noble Lord, Lord Borrie, said, of what is defined as ““unnecessary”” or any indication of who will define it. Then there is the whole issue of how the nuclear option in Part 4 will be applied. The process is tortuous and overengineered in the extreme. If it was deemed that the regulator was failing and needed to be put into special measures, there would be wide consultation with a huge variety of commentators—half a page of the guidance accompanying the Bill consists of a list of the people who would have to be asked. It would then go to the Panel for Regulatory Accountability. I cannot remember if that panel is still chaired by the Prime Minister, but it used to be. There would then be a statutory instrument, which would come through your Lordships’ House by affirmative resolution, simply to say to a failing regulator that it was no good and it had to look at its unnecessary burdens. To be frank, were I the chairman or the chief executive of an organisation that had got that far, I would probably have got the hint that I was not going to be in my job for much longer. Indeed, were I the Minister responsible for a regulator that had got that bad and had to have that panoply of measures applied to it in order to put it into failing status, I might have had a quiet word with the chief executive and the chairman of that body long before we went through the rigmarole outlined for Part 4 in both the Bill and the guidance. Part 4 is very, very silly law. Apart from that, we must think about some of the bureaucratic controls that have been introduced since the consultation on the Bill, taking it from being quite a good Bill to being rather a bad one. I was pleased to hear the noble Baroness, Lady Wilcox, say that perhaps this indicates that we are losing sight of what regulation is for. Regulation is there to deliver social and environmental benefits, as well as to help promote business. A couple of days ago the Prime Minister himself helped to launch a report which said that high environmental standards and a loud, long and legal proclaiming of the framework within which businesses needed to deliver for those environmental standards were fundamental to helping to create investment in environmental technologies and to create global markets. There is a great deal of evidence globally that high standards for a variety of outcomes, social and environmental, help to drive innovation, reduce risk, create markets, and are good for business. The report of the innovation unit in BERR, when it was known as the DTI, confirmed that. We should pause and think about why all the regulators who have worked their socks off for the past few years to implement better regulation, reduce regulatory burdens, streamline regulation and do many of the things that the noble Lord, Lord Sainsbury, was keen to see have all of a sudden become mad, starey-eyed, bad and dangerous to know, lusting to stamp on the neck of British business and therefore having to be kept firmly under control. This would have been good legislation had we not, alas, overengineered it and made it excessively bureaucratic. It certainly does not represent better regulation of the regulators; it represents rather poor regulation of the regulators. I hope that your Lordships will treat it thus in Committee.