Lords amendment: No. 73, in page 55, line 31, at end insert—
("( ) The Authority shall not impose a penalty on a licence holder under subsection (1) where it is satisfied that the most appropriate way of proceeding is under the Competition Act 1998.")
Mr. Deputy Speaker
With this it will be convenient to discuss Lords amendments Nos. 74 and amendments (a), (b) and (c) thereto, 75 and amendment (b) thereto, and 76 to 78, 126 and 127, amendments (a), (b) and (c) thereto, and 128, amendment (b) thereto and 129 to 131, 183, 201, 219, 220 and 237.
§ Mrs. Liddell
Lords amendments Nos. 73 and 126 insert into the financial penalties provisions protection against double jeopardy in regard to the Competition Act 1998. They follow closely the terms of the protection against double jeopardy that already applies to licence enforcement orders in the utility statutes. They help to achieve consistency between the provisions inserted by this Bill in both the Gas Act 1986 and the Electricity Act 1989, and provisions that already exist. They also ensure that there is clarity on the interaction between licence enforcement provisions and Competition Act enforcement provisions.
Lords amendments Nos. 74 and 127 respond to concerns raised throughout the Bill's passage about the lack of a specific upper limit on financial penalties. The principal limit on the level of financial penalties remains the requirement for a penalty to be reasonable in all the circumstances of the case. We have had lengthy discussions in Committee and on the Floor of the House about the definition of "reasonable". The amendments, however, give licence holders extra comfort, in that they impose an upper limit on the amount of any financial penalty that can be imposed. That limit is 10 per cent, of the licence holder's turnover. Detailed provisions—for example, the definition of turnover—will be set out in an order made by the Secretary of State by affirmative resolution.
1353 Lords amendments Nos. 76 and 129 relate to the 12-month time limit applying to the imposition of a financial penalty in cases in which there has been a contravention of an obligation, and no enforcement order has been made. If the amendments are accepted, no penalty may be imposed in respect of such a contravention unless, within 12 months of that contravention, the authority has issued either a penalty notice or a notice under section 28(2) of the Electricity Act 1989 or section 38(1) of the Gas Act 1986, as amended, seeking information for the purpose of its functions in relation to the imposition of financial penalties. When the authority issues a notice under either the Electricity Act or the Gas Act, no further time limits will apply to the imposition of a penalty.
The amendments will ensure that the authority has enough time to investigate alleged contraventions and to decide whether to impose a penalty. The authority will be able to determine the amount of any such penalty, particularly in large, complex cases in which it may have difficulty in obtaining information from the licence holder, or licence holders, concerned. That will mean that legitimate investigations of alleged contraventions will not run out of time as a result of licence holders taking too long in supplying the authority with information. That could well happen in the case of companies that did not wish to comply with licence requirements. The amendments remove any incentive for foot-dragging.
Lords amendments Nos. 77 and 130 are consequential on Lords amendments Nos. 76 and 129. Lords amendments Nos. 78 and 131 apply to the enforcement provisions of the Gas and Electricity Acts, as opposed to the proposed financial penalties provisions. Lords amendments Nos. 75, 128, 183, 201, 219, 220 and 237 are minor, technical and consequential amendments, replacing a reference to the commencement of a subsection with a more accurate reference to the commencement of a section of the Utilities Act 2000.
The Opposition have tabled some amendments—It being Seven o 'clock, the debate stood adjourned.Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business) and Order of 25th October 1999,That, at this day's sitting, the Utilities Bill and the Postal Services Bill may be proceeded with, though opposed, until any hour.—[Mr. Pope.]
§ Question agreed to.
§ Lords amendments again considered.
§ Question again proposed, That the House agrees with the Lords in the said amendment.
§ Mrs. Liddell
The Government will resist the amendments that the Opposition have tabled to this group of Lords amendments. I shall speak to those amendments in due course.
§ Mr. Gibb
We have argued long and hard—on Second Reading and in Committee, as well as in the other place—for the Government to introduce a cap on the potential penalty and fines that the regulator can impose on the utility companies for failing to comply with licence conditions or breaching standards of performance obligations.
Limitless fines were one of the major concerns that industry had with the Bill. The problem with a penalty regime without a ceiling on the upper fine is that it adds 1354 to the level of regulatory risk faced by the utility companies, and that that increased risk leads to demands from the providers of capital for a higher rate of return in compensation. As the industries that we are discussing are highly capital intensive, such demands constitute a significant hit to the profit and loss account, which inevitably will be passed on to the consumer either in higher charges or in charges that are not as low as they would otherwise be.
We were delighted, therefore, that the Government eventually backed down and introduced, in the other place, a cap. However, that cap is still high. The fact is that a fine of 10 per cent, of turnover is still sufficiently high to wipe out completely any company that receives one. A significant portion of the regulatory risk will remain, notwithstanding the cap. Therefore, our amendment (a) seeks to reduce the 10 per cent, figure to 5 per cent.
Our next concern about the penalty regime hinges on the definition of turnover. The wording of the 10 per cent, turnover cap used in Lords amendment No. 74 echoes that used in the Competition Act 1998, which also has 10 per cent, turnover cap. However, we had to wait several months after implementation of that Act for "turnover" to be defined. When the statutory instrument defining turnover was finally produced, it added to rather than alleviated concerns.
In our amendments (b) and (c), we have sought to clarify the definition of turnover to avoid the same problems in this legislation. That will at least save the Minister for Competition and Consumer Affairs the inconvenience of having to produce another statutory instrument, speaking to another Committee on statutory instruments—he and I have already met in several such Committees—and swotting up on his briefings.
Our amendments will also remove the uncertainty over whether "turnover" means only the company's turnover in the United Kingdom, or whether any turnover derived from abroad should also be included. The amendments make it clear that the turnover should be derived only from the United Kingdom.
Our amendments also deal with the sleight of hand that the Government have perpetrated in the 1998 Act. In that Act, as the Minister knows, the cap for fines was set at 10 per cent, of turnover. However, the definition of turnover in the subsequent statutory instrument—which I think that he introduced—was such that it could be applied to up to three years of turnover. Therefore, at a stroke, he changed the 10 per cent, limit to 30 per cent. That is not an acceptable approach under the 1998 Act, and it certainly should not be an acceptable approach in the Bill.
Our amendment (c) defines turnover as a period not exceeding 12 months, so that the maximum fine in the Bill will remain at 10 per cent, and not be tripled by means of a subsequent statutory instrument.
I am disappointed—the Minister for Energy and Competitiveness in Europe will be pleased to hear—that the Government will resist our amendments. If they do, however, I shall try to persuade my colleagues to vote for them.
§ Mrs. Liddell
There we have it—soft on price fixers and soft on the causes of price fixing. [Interruption.] At this time of night, I always find it best to be catchy.
1355 I resist these Opposition amendments to the Bill's financial penalty provisions. As the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) said, amendment (a) to Lords amendment 74 and amendment (a) to Lords amendment No. 127 seek to replace the cap of 10 per cent, of turnover with a cap of 5 per cent, of turnover. The Government have been consistent on this point. We have always maintained that the primary constraint on the level of any financial penalty is the requirement for the penalty to be reasonable in all the circumstances of the case.
We initially resisted the imposition of the cap on penalties on the ground that it was not strictly necessary, but we have also listened to the views of groups inside and outside the House and responded to the growing view that a limit would provide some comfort to companies without unduly constraining the authority's ability to protect consumers' interests.
Now that we have done that, the Opposition want to move the goalposts again. No one gains from that. The Government have already done everything that is necessary to respond to the concerns that have been put to us about these provisions. We have introduced a cap on penalties, as requested, analogous to that in the Competition Act 1998, which seemed to be the example that the Opposition referred to most often in Committee and elsewhere when pressing for a cap.
The only possible reason for wanting to introduce a lower cap is to protect companies from facing a penalty that would be reasonable in all the circumstances of the case when they have committed a serious contravention. A cap of 5 per cent, of turnover would run that risk, and on that basis the Government cannot accept it.
Amendments (b) and (c) to Lords amendment No. 74 and amendments (b) and (c) to Lords amendment No. 127 would insert provisions in the Bill to the effect that the definition of turnover used in relation to the cap on financial penalties shall be the UK turnover of the licence holder in the year preceding the imposition of the penalty.
The Lords amendment inserting a limit on financial penalties also states that detailed provisions in relation to the definition of turnover and other matters shall be set out in an order made by the Secretary of State by affirmative resolution. There will therefore be ample opportunity for Parliament to discuss the relevant provisions when the order is made. The definition that the Opposition amendments would insert would pre-empt the debate that will take place when the order is made. The amendments are therefore unnecessary.
Amendment (b) to Lords amendment No. 75 and amendment (b) to Lords amendment No. 128 have been linked—very tenuously—to a part of the financial penalties provisions that prevents penalties from being applied retrospectively. The amendment tabled in another place was purely technical.
The amendments to the Lords amendments are an attempt to reintroduce a provision that penalties shall be limited to cases of recklessness and intent, similar to the Competition Act 1998 restriction to cases of negligence and intent. The Government have resisted amendments to that effect throughout the passage of the Bill, on the ground that the onus should be on companies to comply with their licence conditions and that such an amendment would work against the interests of consumers.
1356 As my noble Friend Lord McIntosh explained in another place, there are valid precedents for our approach, such as the National Lottery Act 1998 and the Broadcasting Acts 1990 and 1996, which were introduced under the previous Administration. Those Acts provide for the relevant regulatory authority to impose financial penalties for contraventions of licence conditions. They do not provide get-out clauses for companies that breach their licences without negligence or intent. There are good reasons for the approach that the Government have adopted.
We hold to the view that the onus should be on the licence holder to maintain compliance, especially when the consumers concerned cannot move to another service provider, as is the case with the electricity transmission and distribution companies and the gas transporters.
The amendments to the Lords amendments ignore entirely the nature of the powers that we are providing. The authority will have a power, not a duty, to impose financial penalties. Any penalty that it imposes must be reasonable in all the circumstances of the case. It seems most unlikely that any penalty that did not take account of best endeavours by a licence holder to remedy a contravention would be considered reasonable in all the circumstances of the case, and any such penalty would without doubt be liable to challenge in the courts. Consumers none the less deserve proper protection, and the amendments do not help in that respect.
For all the reasons that I have set out, I cannot accept the Opposition's proposals. I hope that the hon. Gentleman will not press the amendments to a vote but, if he does, I am afraid that we must oppose them.
§ Lords amendment agreed to.
Lords amendment: No. 74, in page 56, line 39, at end insert—
("(6A) No penalty imposed by the Authority under this section may exceed 10 per cent, of the turnover of the licence holder (determined in accordance with provisions specified in an order made by the Secretary of State).
(6B) An order under subsection (6A) shall not be made unless a draft of the instrument containing it has been laid before and approved by a resolution of each House of Parliament.")
Amendment proposed to the Lords amendment: (c), leave out from "holder" to end and insert—
'the turnover being determined on the applicable turnover for the business year preceding the date when the infringement ended and shall in any case not exceed a period of 12 months'.—[Mr. Gibb.]
§ Question put, That the amendment to the Lords amendment be made:—
§ The House divided: Ayes 120, Noes 257.1359
|Division No. 297]||[7.10 pm|
|Ainsworth, Peter (E Surrey)||Brooke, Rt Hon Peter|
|Amess, David||Browning, Mrs Angela|
|Arbuthnot, Rt Hon James||Bruce, Ian (S Dorset)|
|Atkinson, Peter (Hexham)||Butterfill, John|
|Baldry, Tony||Cash, William|
|Bercow, John||Chapman, Sir Sydney|
|Beresford, Sir Paul||(Chipping Bamet)|
|Blunt, Crispin||Clappison, James|
|Body, Sir Richard||Clarke, Rt Hon Kenneth|
|Bottomley, Peter (Worthing W)||Collins, Tim|
|Bottomley, Rt Hon Mrs Virginia||Cormack, Sir Patrick|
|Brady, Graham||Cran, James|
|Brazier, Julian||Davies, Quentin (Grantham)|
|Davis, Rt Hon David (Haltemprice)||Maclean, Rt Hon David|
|Day, Stephen||McLoughlin, Patrick|
|Duncan Smith, lain||Madel, Sir David|
|Evans, Nigel||Malins, Humfrey|
|Fabricant, Michael||Maples, John|
|Fallon, Michael||Maude, Rt Hon Francis|
|Flight, Howard||May, Mrs Theresa|
|Forth, Rt Hon Eric||Moss, Malcolm|
|Fox, Dr Liam||Nicholls, Patrick|
|Fraser, Christopher||Norman, Archie|
|Gale, Roger||O'Brien, Stephen (Eddisbury)|
|Gamier, Edward||Ottaway, Richard|
|Gibb, Nick||Paice, James|
|Gill, Christopher||Paterson, Owen|
|Gillan, Mrs Cheryl||Pickles, Eric|
|Gorman, Mrs Teresa||Prior, David|
|Gray, James||Robathan, Andrew|
|Green, Damian||Rowe, Andrew (Faversham)|
|Greenway, John||Ruffley, David|
|Grieve, Dominic||St Aubyn, Nick|
|Gummer, Rt Hon John||Shepherd, Richard|
|Hague, Rt Hon William||Simpson, Keith (Mid-Norfolk)|
|Hamilton, Rt Hon Sir Archie||Spelman, Mrs Caroline|
|Hammond, Philip||Spicer, Sir Michael|
|Hawkins, Nick||Spring, Richard|
|Hayes, John||Stanley, Rt Hon Sir John|
|Heald, Oliver||Streeter, Gary|
|Heathcoat-Amory, Rt Hon David||Swayne, Desmond|
|Horam, John||Syms, Robert|
|Howard, Rt Hon Michael||Tapsell, Sir Peter|
|Jack, Rt Hon Michael||Taylor, Ian (Esher & Walton)|
|Jenkin, Bernard||Tredinnick, David|
|Johnson Smith,||Trend, Michael|
|Rt Hon Sir Geoffrey||Tyrie, Andrew|
|Key, Robert||Viggers, Peter|
|King, Rt Hon Tom (Bridgwater)||Waterson, Nigel|
|Kirkbride, Miss Julie||Wells, Bowen|
|Laing, Mrs Eleanor||Whitney, Sir Raymond|
|Lait, Mrs Jaoqui||Whittingdale, John|
|Lansley, Andrew||Widdecombe, Rt Hon Miss Ann|
|Leigh, Edward||Wilkinson, John|
|Letwin, Oliver||Willetts, David|
|Lidington, David||Wilshire, David|
|Lloyd, Rt Hon Sir Peter (Fareham)||Yeo, Tim|
|Loughton, Tim||Young, Rt Hon Sir George|
|Lyell, Rt Hon Sir Nicholas||Tellers for the Ayes:|
|MacGregor, Rt Hon John||Mr. Geoffrey Clifton-Brown|
|McIntosh, Miss Anne||and|
|MacKay, Rt Hon Andrew||Mr. John Randall|
|Abbott, Ms Diane||Boateng, Rt Hon Paul|
|Ainsworth, Robert (Cov'try NE)||Bradley, Keith (Withington)|
|Alexander, Douglas||Bradley, Peter (The Wrekin)|
|Allen, Graham||Bradshaw, Ben|
|Anderson, Donald (Swansea E)||Brinton, Mrs Helen|
|Anderson, Janet (Rossendale)||Brown, Rt Hon Nick (Newcastle E)|
|Armstrong, Rt Hon Ms Hilary||Buck, Ms Karen|
|Ashton, Joe||Burden, Richard|
|Atkins, Charlotte||Burnett, John|
|Austin, John||Byers, Rt Hon Stephen|
|Banks, Tony||Cable, Dr Vincent|
|Barnes, Harry||Cabom, Rt Hon Richard|
|Barton, Kevin||Campbell-Savours, Dale|
|Beard, Nigel||Cann, Jamie|
|Beith, Rt Hon A J||Caplin, Ivor|
|Bell, Stuart (Middlesbmugh)||Casale, Roger|
|Benn, Hilary (Leeds C)||Caton, Martin|
|Benn, Rt Hon Tony (Chesterfield)||Cawsey, Ian|
|Bennett, Andrew F||Chapman, Ben (Wirral S)|
|Berrton, Joe||Clark, Rt Hon Dr David (S Shields)|
|Best, Harold||Clark, Paul (Gillingham)|
|Betts, Clive||Clarke, Tony (Northampton S)|
|Blears, Ms Hazel||Clelland, David|
|Blizzard, Bob||Clwyd, Ann|
|Coaker, Vemon||Jackson, Ms Glenda (Hampstead)|
|Coffey, Ms Ann||Jackson, Helen (Hillsborough)|
|Cohen, Harry||Jamieson, David|
|Coleman, lain||Jenkins, Brian|
|Colman, Tony||Johnson, Alan (Hull W& Hessle)|
|Cook, Frank (Stockton N)||Johnson, Miss Melanie|
|Cooper, Yvette||(Welwyn Hatfield)|
|Corbett, Robin||Jones, Dr Lynne (Selly Oak)|
|Corbyn, Jeremy||Jones, Martyn (Clwyd S)|
|Corston, Jean||Jowell, Rt Hon Ms Tessa|
|Cousins, Jim||Keeble, Ms Sally|
|Cox, Tom||Keen, Alan (Feltham & Heston)|
|Cryer, John (Hornchurch)||Keen, Ann (Brentford & Isleworth)|
|Cummings, John||Kennedy, Jane (Wavertree)|
|Cunningham, Jim (Cov'try S)||Khabra, Piara S|
|Darvill, Keith||Kidney, David|
|Davey, Edward (Kingston)||King, Andy (Rugby & Kenilworth)|
|Davey, Valerie (Bristol W)||Ladyman, Dr Stephen|
|Davies, Rt Hon Denzil (Llanelli)||Laxton, Bob|
|Davies, Geraint (Croydon C)||Leslie, Christopher|
|Dawson, Hilton||Lewis, Ivan (Bury S)|
|Denham, John||Lewis, Terry (Worsley)|
|Dismore, Andrew||Liddell, Rt Hon Mrs Helen|
|Doran, Frank||Linton, Martin|
|Dunwoody, Mrs Gwyneth||Lloyd, Tony (Manchester C)|
|Eagle, Angela (Wallasey)||McAvoy, Thomas|
|Eagle, Maria (L'pool Garston)||McCabe, Steve|
|Edwards, Huw||McCafferty, Ms Chris|
|Ellman, Mrs Louise||McDonagh, Siobhain|
|Ennis, Jeff||McDonnell, John|
|Field, Rt Hon Frank||McGuire, Mrs Anne|
|Fisher, Mark||McIsaac, Shona|
|Fitzpatrick, Jim||McKenna, Mrs Rosemary|
|Fitzsimons, Mrs Lorna||Mackinlay, Andrew|
|Flint, Caroline||McNamara, Kevin|
|Flynn, Paul||McNuHy, Tony|
|Follett, Barbara||McWalter, Tony|
|Foster, Rt Hon Derek||Mahon, Mrs Alice|
|Foster, Don (Bath)||Mallaber, Judy|
|Foster, Michael Jabez (Hastings)||Marshall, David (SheWeston)|
|Foster, Michael J (Worcester)||Marshall, Jim (Leicester S)|
|Fyfe, Maria||Meacher, Rt Hon Michael|
|George, Bruce (Walsali S)||Merron, Gillian|
|Gerrard, Neil||Michael, Rt Hon Alun|
|Gibson, Dr Ian||Michie, Bill (Shef'ld Heeley)|
|Godman, Dr Norman A||Miller, Andrew|
|Godsiff, Roger||Moffatt, Laura|
|Gordon, Mrs Eileen||Moran, Ms Margaret|
|Griffiths, Jane (Reading E)||Morgan, Ms Julie (Cardiff N)|
|Griffiths, Win (Bridgend)||Motley, Elliot|
|Grocott, Bruce||Morris, Rt Hon Ms Estelle|
|Grogan, John||(B'ham Yardley)|
|Gunnell, John||Mountford, Kali|
|Hall, Mike (Weaver Vale)||Mullin, Chris|
|Hall, Patrick (Bedford)||Naysmith, Dr Doug|
|Hamilton, Fabian (Leeds NE)||O'Brien, Bill (Normanton)|
|Harvey, Nick||O'Brien, Mike (N Warks)|
|Heal, Mrs Sylvia||Olner, Bill|
|Healey, John||Opik, Lembit|
|Hepburn, Stephen||Palmer, Dr Nick|
|Heppell, John||Pearson, Ian|
|Hesford, Stephen||Perham, Ms Linda|
|Hewitt, Ms Patricia||Pickthall, Colin|
|Hill, Keith||Pike, Peter L|
|Hinchliffe, David||Plaskitt, James|
|Hodge, Ms Margaret||Pollard, Kerry|
|Hoon, Rt Hon Geoffrey||Pond, Chris|
|Hopkins, Kelvin||Pope, Greg|
|Howarth, Alan (Newport E)||Pound, Stephen|
|Howells, Dr Kim||Powell, Sir Raymond|
|Hughes, Ms Bevertey (Stretford)||Prentice, Ms Bridget (Lewisham E)|
|Hughes, Kevin (DoncasterN)||Prentice, Gordon (Pendle)|
|Hurst, Alan||Prosser, Gwyn|
|Hutton, John||Quin, Rt Hon Ms Joyce|
|Iddon, Dr Brian||Quinn, Lawrie|
|Illsley, Eric||Radice, Rt Hon Giles|
|Rammell, Bill||Taylor, Rt Hon Mrs Ann|
|Reed, Andrew (Loughborough)||Taylor, Ms Dan (Stockton S)|
|Rendel, David||Temple-Morris, Peter|
|Robinson, Geoffrey (Cov'try NW)||Thomas, Gareth R (Harrow W)|
|Rogers, Allan||Timms, Stephen|
|Rooker, Rt Hon Jeff||Trickett, Jon|
|Rooney, Terry||Turner, Dr George (NW Norfolk)|
|Ross, Ernie (Dundee W)||Turner, Neil (Wigan)|
|Ruddock, Joan||Twigg, Derek (Halton)|
|Salter, Martin||Twigg, Stephen (Enfield)|
|Sarwar, Mohammad||Tyler, Paul|
|Savidge, Malcolm||Vis, Dr Rudi|
|Sawford, Phil||Walley, Ms Joan|
|Sedgemore, Brian||Ward, Ms Claire|
|Shaw, Jonathan||Wareing, Robert N|
|Sheerman, Barry||Watts, David|
|Shipley, Ms Debra||Whitehead, Dr Alan|
|Skinner, Dennis||Wicks, Malcolm|
|Smith, Jacqui (Redditch)||Williams, Rt Hon Alan (Swansea W)|
|Snape, Peter||Williams, Mrs Betty (Conwy)|
|Soley, Clive||Wills, Michael|
|Southworth, Ms Helen||Winnick, David|
|Spellar, John||Wood, Mike|
|Starkey, Dr Phyllis||Woodward, Shaun|
|Stewart, Ian (Ecdes)||Woolas, Phil|
|Stinchcombe, Paul||Wright, Anthony D (Gt Yarmouth)|
|Stoate, Dr Howard||Wyatt, Derek|
|Strang, Rt Hon Dr Gavin|
|Stuart, Ms Gisela||Tellers for the Noes:|
|Stunell, Andrew||Mr. Jim Dowd and|
|Sutcliffe, Gerry||Mr. Don Touhig|
§ Question accordingly negatived.
§ Lords amendment No. 74 agreed to.
§ Lords amendments Nos. 75 to 94 agreed to.