Regulatory Enforcement and Sanctions Bill [HL]

I thank noble Lords for their welcome. It is a pleasure to be here in Committee. On the point made by the noble Viscount, Lord Colville, about the definition of, "““significant risk of … serious harm””," this will be up to the regulators to determine in individual cases. The threshold has been set deliberately high so that the regulators are not serving stop notices indiscriminately. Regulators are already experienced in deciding what these tests mean. For example, the word ““serious”” already features in health and safety legislation; ““serious personal injury”” is the threshold for prohibition notices made under Section 22 of the Health and Safety at Work etc. Act 1974 and, in time, we would expect the tribunal to establish case law on what constitutes significant risk of serious harm. As to the specific question raised by the noble Lord, Lord Razzall, the Government resisted the use of ““significant”” in the case of the Legal Services Act 2007 because they felt that it would set the bar at too high a level for the purposes of that Act. The use of ““significant”” and ““serious”” in the Bill is limited to only one sanction—stop notices. We are of the view that this is justified. Stop notices are the most far-reaching of the new sanctions and will require at least some part of a business to cease operating. In some cases, stop notices will require a business to shut down completely. These notices should be used only in the most serious circumstances. The threshold is therefore set deliberately high to ensure that regulators do not serve them indiscriminately. A number of less onerous civil sanctions are available to the regulators where the risk is not significant or the harm is not serious, and alternative sanctions such as the discretionary requirement should be used. This is in keeping with the principles set out in the Hampton and Macrory reviews. As I said, case law will establish this in due course. On Amendments Nos. 152 and 153 and stop notices overall, it is important to be able to prevent an offence from occurring when there is a significant risk of serious harm to the public or to the environment. It would not be in the public interest for the regulator to have to wait until the harm has been realised before taking action. These measures were included following consultation on the draft Bill last summer. The concept of preventive notices received strong support in the consultation, with three-quarters of the respondents across the stakeholder group suggesting that they would be a useful additional power. We have already built important safeguards into the Bill. The first is the high threshold. There is also a right of appeal against the sanction to an independent tribunal, and regulators will be required to establish a compensation scheme, as discussed. Noble Lords may wish to note that there are already forms of preventive stop notices, such as the one provided in the Health and Safety at Work etc. Act 1974, which may be used when an inspector is of the opinion that an activity that is or is likely to be carried on involves or will involve a risk of serious personal injury. Preventive notices therefore have an important role to play. It would be perverse for a regulator to have to sit back and wait for a serious offence to be committed and for the harm to be realised where such an eventuality may well be obvious. On Amendment No. 152A, as we have discussed, stop notices are the most far-reaching of the new civil sanctions and are reserved entirely for serious acts of non-compliance. The threshold has been set high. I should point out that we asked during the consultation on the draft Bill whether the thresholds were set at the right level. Almost 60 per cent of respondents, including many regulators, agreed that the test was set at the right level. On Amendment No. 155 and the period of time that the regulator has to issue a completion certificate for a stop notice, Clause 45(2)(c) requires a regulator who is satisfied that a business has taken the steps specified in the stop notice to issue a completion certificate. In practice, we expect this to happen as soon as it is practicable for the regulator to do so. Indeed, we would expect the regulator to keep under review the operation of any stop notice that they issue to ensure that the business has taken the required steps towards compliance. The procedure in Clause 45(2)(e), which allows a business to request a certificate from the regulator confirming its compliance, is a safeguard intended to ensure that there is ongoing monitoring of the operation of the stop notice. We stress that the 14-day time limit in subsection (2)(f) is the maximum time in which the regulator must decide whether to issue a certificate. A seven-day limit would not always give regulators sufficient time to assess fully whether a business had complied with the terms of their notice. In some cases, for example, a regulator may need to carry out tests to assess whether the business is in compliance. A leaking pipe that has emitted toxic waste might need to be tested for toxins to ensure that they have returned to acceptable levels. In such a case, the regulator may have to wait for test results. There may also be other legitimate reasons for delay. For example, the regulator may need to contact a third party to ensure that it is no longer suffering harm. A 14-day time limit therefore strikes the right balance between providing a safeguard for business and allowing regulators sufficient time to assess whether the business has complied with the terms of the notice. I should add that the order giving a regulator access to the new powers may provide whether stop notices are automatically suspended when the business appeals against a notice or whether this decision should be left to the tribunal. Finally, I understand the concerns of the noble Baroness, Lady Wilcox, regarding the stop notice compensation. The Delegated Powers and Regulatory Reform Committee has also expressed concern regarding the detail of this provision, but I hope that we can explain why such detail is best left to secondary legislation. Due to the serious nature of stop notices, we believe that compensation should, in certain circumstances, be available where a notice is wrongly imposed. Accordingly, orders giving regulators the power to serve stop notices will have to provide for regulators, on application, to compensate businesses where they have suffered loss because of the service of a stop notice. The order will determine the specific grounds for compensation and will be subject to the affirmative procedure, so noble Lords will have the chance to debate it. The order will also determine the types of loss that can be compensated. Compensation might be appropriate where a business wins an appeal against the imposition of a stop notice and where the regulator is considered to have acted unreasonably or in serious default. Compensation will not be appropriate in all cases—for example, it may not be appropriate if an appeal is upheld on a technicality. The Bill provides flexibility in allowing the order to prescribe the circumstances in which compensation might be payable. It would not be possible to prescribe in the Bill a detailed compensation scheme that would be appropriate for the wide range of regulators covered by the Bill. The provisions need to take account of any existing compensation schemes that regulators already operate, as well as the common law rights to compensation. The Bill is therefore not prescriptive on the form that any compensation scheme should take. In the light of what I have said, I trust that the noble Viscount will now feel able to withdraw the amendment and I urge noble Lords to withdraw their opposition to Clause 46.