Regulatory Enforcement and Sanctions Bill [HL]

The administrative sanctions in Part 3 offer regulators an effective alternative to criminal prosecution, giving them the flexibility to choose the most appropriate and effective sanction to match the particular instance of non-compliance. When pursuing a criminal prosecution, a regulator can reclaim its costs through the courts in the event of a successful prosecution. Where a regulator chooses to impose one of the new administrative sanctions proposed in the Bill, an issue arises over how a regulator can then reclaim its costs. I note the concerns that have been expressed. We want to ensure that there is no financial disincentive to using the new sanctions. There is a real possibility that regulators could simply continue to use the routes of criminal prosecution even when that was not the most proportionate or appropriate response and therefore we have built in safeguards on cost recovery. In particular, businesses will have a right of appeal to an independent tribunal against both a decision to recover costs and the amount of such costs to the business. As has been said, bringing in any enforcement action generates costs. Non-compliant businesses should not escape having to pay these costs simply because the regulator has chosen the administrative sanctioning route. There should be considerable savings for businesses should a regulator choose to impose a civil sanction. In particular, businesses will avoid the cost of legal representation before the courts. In response to Amendment No. 156 and the question asked by the noble Viscount, Lord Colville, I should explain that the power does not extend to fixed monetary penalties because these are designed to be used to sanction low-level, more minor instances of non-compliance. Investigation costs for this type of offence should be much lower than for discretionary requirements or stop notices and should be borne by the regulator. Enforcement undertakings are excluded because they are offered by the business. For example, if a business discovers that it has inadvertently breached a regulatory requirement, brings that to the attention of the regulator and offers an undertaking to put right any harm that has been caused, the regulator’s investigation costs should, again, be much lower. Amendment No. 179 is unnecessary given the cost-recovery scheme that I have just mentioned. However, there is a specific issue about the LBRO being the administrator for such a fund. The body was set up with the clear objective of promoting consistency of regulatory enforcement among local authorities. As such, it does not have the expertise in the administration of such a fund, which could amount to more than £30 million, nor does it have the remit to involve itself in the funding of local and national regulators’ legal cases. It will not surprise the Committee that we believe that, as with fine revenues, the Treasury is best placed to determine the use of funds. In light of what I have said, I hope that the noble Viscount will feel able to withdraw his amendment.