Regulatory Enforcement and Sanctions Bill [HL]

moved Amendment No. 49: 49: Clause 35, page 15, line 29, leave out paragraph (a) The noble and learned Lord said: My Lords, in moving the amendment, I shall speak also to the other amendments in my name—Amendments Nos. 50, 51, 52, 55, 60 and 63. Amendments Nos. 49 and 50 remove the power of regulators by themselves to impose fixed and variable penalties. Amendment No. 52 removes the exclusion of the normal prosecuting authorities—the CPS, the police and their Scottish and Northern Ireland equivalents—from their normal prosecuting functions. In other words, the aim of my amendments is largely to keep the present system going and only to amend it where it produces improvements, rather than an oppressive effect. Amendments Nos. 55, 60 and 63 continue the process by removing Clauses 38, 39 and part—I emphasise, part—of Clause 41, which provide for statutory instruments to lay down the detailed operation of fixed and variable monetary penalty procedures. I invite the Minister, who I, too, welcome to her place, to note that I have carefully not removed from Clause 41 the power to make stop orders and reparation orders—in other words, restorative justice orders because I can see the benefit of those and I have kept them in the clause. The overall objective of these amendments is not to destroy the Bill, as has occasionally been feared, nor to damage in any way the existing regulatory system. I recognise that we need fair and carefully thought-out systems of regulation. The objective is to prevent the ousting of the jurisdiction of the ordinary courts, which provide one of the most important checks and balances in our free society and which are not adequately replaced by an end-of-the-line right to appeal to a specialist or non-specialist tribunal. The Bill, as drafted by the Government, potentially makes every regulator and every public official in every local authority, effectively not just the regulator, but the investigator, prosecutor, judge, jury and sentencer in his or her own cause, subject only to that ultimate right of appeal, supposedly to a first-tier tribunal. There may be other problems with the appeals procedure, which we will deal with in later amendments. The idea mentioned by Professor McCrory is that this should be a specialist tribunal. Whether this will turn out to be the case in practice, given the huge diversity of subjects, is questionable when one remembers that the Bill covers something like 178 different statutes, plus all the statutory instruments that come under them, as set out in Schedules 6 and 7 to the Bill. This is a huge constitutional inroad into the liberties of tens of thousands—perhaps hundreds of thousands—of citizens who, in one way or another, will find aspects of their lives increasingly subject to regulation. If we were to count how many things we do that are regulated in one form or another, most of which we carry pretty lightly, and then think of all the regulations covering people who in ordinary life serve us in one way or another—whether they be hauliers, waste disposers, people in hospitals, people who manufacture drugs or gardening products, all the farming industry and so on—it is necessarily a very broad subject and these are immense powers. It is not just me who says this. Both the Delegated Powers and Regulatory Reform Committee and the Constitution Committee, of which I am a member, have warned of the unprecedented effects of this Bill. Last July, on taking office, the Prime Minister told the other place that the Government intended to return the control of executive powers to Parliament. This goes in the opposite direction, because it takes away from the ordinary courts the right and duty to dispense justice and it gives it, subject only to that right of appeal, to public officials. The Delegated Powers and Regulatory Reform Committee, in its second report of the 2007-08 session, says in paragraph 34 on page 10: "““This Bill, among other things, enables subordinate legislation to prescribe, to an unprecedented extent, sanctions which may be imposed on those considered to have committed offences under a range of Acts or under subordinate legislation””." Paragraph 48 states: "““The purpose of Part 3 of the Bill is to enable Ministers of the Crown to confer on regulators power to impose sanctions as an alternative to prosecuting the offender through the criminal courts … The Crown Prosecution Service, the police and the others specified in Clause 35(3) are excluded. So in practice this second category will comprise largely local authorities and Ministers””." The Government argue that there are examples where this has happened before—and there are examples, but on nothing like this scale. If one takes the VAT authorities, the tribunal system is well established. The Financial Services Authority has similar powers and, at the other end of the scale, if you are appealing against a parking ticket, which is a civil penalty, you can go to the parking authority tribunal, or whatever its name is. But what is being done here is very different. With regard to VAT tribunals, the chambers I was in for many years, and from which I am now retired, has many barristers who are experts in this field. This is an extraordinarily complex and detailed area, and only a thoroughly expert tribunal is suited to dealing with it. It would be impossible to deal with it sensibly before magistrates or the Crown Court without making special provisions effectively for a special court. A lot of that applies to the FSA as well. Parking regulations are utterly different. They are simply penalties in circumstances where one knows pretty well whether one is guilty. Most people accept their guilt, but in quite a large number of cases, if there has been a mistake, the decisions are turned over by the tribunals. One occasionally gets rather cross when they are not overturned but it is not a big deal for the citizen and it is perfectly acceptable. Unfortunately, as I shall explain in a moment, in this area we are dealing with substantial penalties, even under the fixed monetary penalty system. They can be up to the magistrates’ court maximum, which I think is currently £5,000, and a penalty of half that amount can damage the lives of a large number of citizens. Then there are variable monetary penalties. I sympathise with Professor McCrory in that people who have committed very serious offences should be punished proportionately and the punishments may have to be very large fines, but if those fines are dished out by an official and are subject only to an appeal, that is not satisfactory. The Bill was very much led by substantial business, although it is supported in many ways by small business. However, I think that sometimes the small business report gets over-enthusiastic about King Stork and is over-critical of what might be seen as King Log. Other noble Lords will remember the moral of La Fontaine’s whatever it was called. The Delegated Powers and Regulatory Reform Committee warns in paragraph 49 that: "““The scheme under Part 3 must be distinguished from the two types of ‘civil sanctions’ scheme which are more commonly to be found in existing legislation””." I invite Ministers to think very carefully about whether they could go down that route—particularly the first type of civil sanction, which is, "““the system under which the offender is given the option of paying a fixed penalty as an alternative to being prosecuted and being heard in the criminal courts, but under which he may always choose to proceed to the criminal courts (e.g. selling alcohol to children)””." The Minister may tell me that that can be done under this Bill, but there is a very big difference. It is one thing to settle with a regulator for a penalty which you agree, knowing that if you do not settle you will go before the court and the court will fix the penalty after a hearing. At the hearing it will see what sort of person you are and will make a decision based on the extent of your guilt, your means, your general circumstances and your health and so on, and will decide what is a fair and proportionate penalty. The alternative is to settle with the regulator, who has the complete whip hand. If it is a fixed penalty, he will impose the penalty that he has been told he can give. In Grand Committee, I asked the Minister several times how much these penalties would be. The answer was, ““Well, we haven’t really worked it out yet””. That is not very good when the Bill has been before Parliament for some months and it is coming up to a parliamentary year since McCrory’s crucial question. I welcome—we will come to this in a moment—the fact that the Government have decided to get rid of the criteria method of judging a penalty. I always thought that that might be difficult. Finding a one-size or two-size-fits-all system—or will it somehow be a four-size-fits-all system?—will be very rough and ready. If the size does not seem fair to you, you will have to spend a lot of time and money going to a tribunal. What is more, the regulator has the whip hand because they have set the penalty. The regulator has to ask what the court, for example, will give to a lorry driver who has strayed into a waste disposal area and has been caught. He probably has a lorry which does not have a massive value but it is his livelihood and, anyway, he may be up to his eyes in debt. He seems to the court basically to be a decent bloke and it will give a proportionate penalty—but the regulator will not because he does not have that discretion. We have a pretty rough-and-ready and over-tough system. The Select Committee on the Constitution made similar points in its first report of 2007-08. Paragraph 9 says in heavy type: "““The scheme envisaged in the bill will enable the transfer, on an unprecedented scale, of responsibilities for deciding guilt and imposing financial sanctions (with no upper limit) away from independent and impartial judges to officials””." At the beginning of paragraph 9, the Committee said that, "““An element of the core meaning of the rule of law is, in the words of A.V. Dicey””—" the great constitutional lawyer on whom we were all brought up— "““‘that no man is punishable or can be lawfully made to suffer in body or goods except for a distinct breach of law established in the ordinary legal manner before the ordinary Courts of the land. In this sense the rule of law is contrasted with every system of government based on the exercise by persons in authority of wide, arbitrary, or discretionary powers of constraint’””." Wide, arbitrary and discretionary powers of constraint are being given to regulators under the Bill. They may blench a bit at ““arbitrary””, but they are still pretty arbitrary given that they cannot even decide on the amount for a fixed monetary penalty. The Committee continued, "““Although many aspects of Dicey’s account of the rule of law””—" remember that this is the Select Committee on the Constitution, which is an all-party Committee of this House— "““are now contested, this passage in our view continues to provide a powerful reminder of the importance of the role of ordinary courts, rather than the executive, in dispensing justice and punishment””." It also raises the question of whether the Bill is compatible with Article 6 of the European Convention on Human Rights. I have a very important question to the Minister, of which I gave notice to the noble Lord, Lord Bach, an hour or two ago: on whom is the burden of proof going to lie before these tribunals? Will it be on the alleged defaulter to prove that the regulator was wrong, or on the regulator, in a case that starts again from the beginning, to establish guilt and then leave it entirely to the tribunal to fix whatever level of penalty is proportionate? I seriously want to know the answer to that. The Minister may find it difficult to answer tonight, but could we please have it in very good time before Third Reading? If the burden of proof is reversed, I strongly suspect that, although the European Court of Justice in Strasbourg will accept such a scheme in some areas like this—it almost certainly accepts VAT tribunals, the FSA and that sort of thing—there is a very serious question whether it is Strasbourg-compliant. It is worth remembering that even if it is Strasbourg-compliant, it is a serious attack on our own United Kingdom rights. I will read Article 6 because, like most of the convention, it is based on what in 1950 was the United Kingdom view of fundamental human rights. It reads: "““1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law””." It is the determination by the tribunal; it is not the determination by an official, subsequently brought to the tribunal. That is exactly what this Government are taking away from our citizens. We and they can now be found guilty by an official who is, as I have said, prosecutor, judge, jury and sentencer. Yes, we can appeal to a tribunal but this is a much greater burden on the citizen and a huge advantage to the regulator. The Government believe that it is much more user-friendly to go to a tribunal. Going to a court on a criminal matter is, up to a point, a frightening thing. One can see that for a large business there may be considerable advantages in going to a tribunal on a civil matter, where, if there is a fine, you can pay it but it does not come through as a criminal conviction. But for a small business or an individual, the amount of money is what matters, as much as the opprobrium. It is said that businesses do not like the opprobrium of being found to have traded in bad meat or something like that, but if they have traded in bad meat they deserve some opprobrium. In Committee, I asked what would be done about that and apparently the Government will say that the regulators must post it on a website or somewhere, but I doubt that will have the same effect as coming before the courts of Hemel Hempstead. My main point is that this Bill as drafted can be handled by substantial businesses who have lawyers and people who can write eloquent letters; they can cope with it as part of the business process. That is one of the reasons why the better regulation aspects are a very good idea. I think they will improve regulation. However, here we have supposed civil penalties in areas of criminality. How will it work in practice? I apologise for speaking at some length, but this is a very important subject. How many cases are we talking about? I am sorry to say that the Government do not really know. I turn to McCrory’s final report. I have every respect for Professor McCrory, whose reports are very balanced. Although they recommend the system that the Government are putting in, they do not go for it categorically; they make very sensible recommendations for improving the ordinary court system, by training, by the Judicial Studies Board and so on. We know that there will be a lot of training if ever proper tribunals get going. McCrory’s final report says, on page 40, that, in 2004, 15,445 cases were prosecuted, of which 15,369 were in the magistrates’ court, which leaves just 76 for the Crown Court. Those figures are to be found in nothing more magnificent than footnote 39 and they are said to come from the Courts Service. Yet page 17 of the same document, quoting figures from CIPFA—I can never remember what CIPFA stands for but it is immensely respected and provides statistics for all local authority matters—gives a total not of 15,000 but of 24,533 cases, plus another 11,704 for the environmental health—formal cautions and court summonses. The total is about 36,000 cases. The Minister told me in a helpful letter of 20 February 2008, for which I am most grateful—I cannot speak too highly of the noble Lord, Lord Bach’s courtesy and co-operation in handling the Bill—that these were supposedly for different periods, but I have looked carefully at the document and it is far from clear that they are for different periods. Even if they were for different years—say, one was for 2004 and one was for 2005—it is very unlikely that there will be a 150 per cent difference in the number of prosecutions; 15,000 to 36,000. What is more, the 15,000 figure is pretty unlikely when one discovers at another point in McCrory—I do not know whether the Minister knows this and I would ask him how many regulators there are—that there are 13,500 regulators. I think those are national regulators; I do not think that they are local authority regulators. If 13,500 regulators are only producing 15,000 prosecutions, it is a bit odd. I do not think that the Government have a grip on the figures. Furthermore, the higher figures that I have quoted, the 36,000, only cover about one-third of the 28 regulators that are to be found in Schedule 5. I do not know why they are there, but 10 of the regulators to be found in Schedule 5 do not prosecute at all. I got all those figures from a series of Parliamentary Questions, as I said to Grand Committee, so I assume that the answers are correct. How many cases does the Minister anticipate when all 178 statutes in Schedules 6 and 7, or at least the great bulk of them, have been brought into the scheme? What proportion is going to be dealt with by administrative penalties and what proportion will continue to be prosecuted in the criminal courts and which will be chosen for which treatment? I cannot give the page reference, but I do not think that McCrory is keen on hybrid systems. The Government’s proposal seems to be a hybrid system. I am grateful to the noble Lord, Lord Bach, for his letter of 20 February and his attempts to answer my questions, but some of them do not seem to be accurate. Much of the policy seems to be unclear and some of it seems to be self-contradictory. Will the Minister give us answers to the following questions either today or in good time before Third Reading? First, how many cases have been prosecuted by regulators in the magistrates’ courts and Crown Courts in each of the past three years for which figures are available? I suggest that she tries to go a little wider than the Courts Service, whose figures do not seem to have been terribly reliable. Secondly, what proportion of those cases is it the Government’s intention to hive off to the proposed system of penalty imposed by officials and subject only to appeal by a tribunal? Thirdly, what principle will be followed in making that decision? For example, the noble Lord, Lord Bach, told me in the letter of 20 February, which is in the Library, that approximately 9,000 of the 15,000 cases that he believed had been prosecuted would be handed to officials, and the other 6,000 would continue to be prosecuted before the courts and that the 6,000 would be what he described as the more egregious cases. Egregious is one of those words the meaning of which instantly leaps to the mind of every noble Lord. It has been sticking out from the flock. It must mean that they are the more serious of those cases. My understanding is that the variable monetary penalty system is provided in order to prosecute the more serious cases, but if they are to go off to the Crown Court, why do we need the variable monetary penalty system? What is the basis for the Government’s argument that officials should be given powers to impose unlimited penalties? Will the Minister tell the House what evidence exists that there is a genuine serious compliance deficit? That word has been bouncing around the Committee and discussions of this Bill as though Britain was somehow in anguish with a compliance deficit. However, Professor McCrory says in his final report that he believes that in many sectors compliance levels in the United Kingdom are generally high. Could the Minister identify before Third Reading in which sectors compliance is said to be generally high and in which it is not? He went on to say—presumably with regard to the areas in which it is not so high—that it is difficult to assess the general level of compliance in the United Kingdom because not every firm is inspected. God help us if that were so. Professor McCrory goes on to say that tangible data in this area of compliance are absent. What are the Government proceeding on if Professor McCrory—a really excellent person—has not really discovered how much compliance there is, or is not? He goes on to say that he asked regulators for their view but, while they could tell him how many prosecutions or statutory notices they issued, they were unable to draw any conclusions on their impact on overall compliance. In paragraph 138, he says that he does not wish to trespass on the sentencing discretion of criminal courts. At page 73—this is where he is highly constructive about going down the route that I urge the Government to follow; that is, to stick with the courts—he makes recommendations for restorative justice and gives examples of how this has been working in the USA and Australia. We know perfectly well that restorative justice can act partly through a tribunal, as it may do abroad, but it can act extremely well through the courts in this country. The Government are espousing that. When I was Attorney-General, I remember going with Mr Pollard as he then was—the chief constable of Thames Valley Police—to see an excellent example of restorative justice. It has been around for some time; all power to the Government’s elbow if they can improve it in this and other areas. Professor McCrory also suggests that the Judicial Studies Board and the Sentencing Guidelines Council should give their mind to these matters. That would be extremely helpful. The criticisms of the magistrates’ courts, the magistrates say, are unfair. They say that the basic complaint—that they do not give large enough penalties—occurs because the prosecutors do not tell them the material facts of a case in sufficient detail. My argument is that we are overturning a very well tried system—it involves hundreds of magistrates’ courts in every part of the country. If magistrates or the Crown Court are told, for example—this is the Oxford case, which was used by the noble Lord, Lord Jones—that somebody has been dumping cans of toxic waste for which they have been paid £58,000 in an area in which it costs £167,000 to clear it up, they are not terribly likely to give a penalty of £28,000. If they did, that would have to be for a very special reason. Since this is the case of the noble Lord, Lord Jones, I ask the Minister whether he will find out who prosecuted and what the prosecutors told the court. That rather important bit of evidence has not yet been forthcoming; perhaps it will be forthcoming, with luck, by Third Reading. I ask the Government to think again seriously about this system. I beg to move.