Now that the Regulatory Enforcement and Sanctions Act has received Royal Assent, local authorities could soon be inundated with requests to enter into a primary authority partnership from businesses who operate in two different local authority areas. Further, if a business takes the advice of its primary authority, other local authorities may struggle to challenge that advice successfully.
Local authorities will also need to consider the alternative penalties proposed in the Act for businesses that commit regulatory breaches, including on the spot fines and notices requiring a business to cease activity.
What will the Act do?
Businesses often feel aggrieved about the time they spend on regulation. It is envisaged that better regulation will promote efficiency, productivity and value for money as well as a better environment for businesses to operate in. The main objects of the Act are therefore to:
- Deliver a regulatory system that is risk-based, consistent, proportionate and effective.
- Streamline and improve regulatory enforcement.
- Establish the Local Better Regulation Office (LBRO) as a statutory body.
When will the Act come into force?
The intention is for the Act to come into force on 1 October 2008 apart from the provisions in Part 2 which should come into force on 6 April 2009.
What's in the Act?
The Act comprises four key parts:
This establishes the LBRO, which will promote greater consistency among local authorities and between local and central government. The LBRO will have five key functions:
- Issuing guidance to local authorities in respect of regulatory services and ensuring local authorities comply with this guidance.
- Reviewing and revising a list of national enforcement priorities for local authority regulatory services.
- Encouraging best practice and innovative approaches to the provision of local authority regulatory services.
- Giving advice to ministers.
- Promoting consistency in regulatory enforcement by local authorities.
What responsibilities does the Act place on local authorities?
The Act creates a number of new responsibilities for local authorities. In addition to responsibilities related to the primary authority scheme (see Part 2 below) general duties include:
- Having regard to any guidance issued by the LBRO.
- Complying with guidance where it is directed to do so by the LBRO.
- Having regard to any list of enforcement priorities published by the LBRO, for example air quality and improving health in the workplace.
Part 2 of the Act establishes a statutory primary authority partnership scheme across the United Kingdom for businesses and other regulated organisations, such as charities, that operate across local authority boundaries.
It will apply where a regulated person carries on an activity in two or more local authority areas and each of those authorities has the same relevant function in relation to that activity. For example, where a business sells a product in two different local authority areas it is also subject to trading standards rules in both areas.
Guidance to the Act prepared by the Department for Business Enterprise and Regulatory Reform says that a local authority can only be a primary authority in relation to its trading standards, environmental health, health and safety, licensing or certain fire safety functions.
A local authority can agree with the business in writing to be its primary authority. In the absence of such agreement, the LBRO can nominate an appropriate local authority to be the primary authority. Where a business or organisation has a primary authority relationship, any other local authority must contact the primary authority before taking enforcement action against that business.
Primary authorities may also make an inspection plan recommending how other local authorities should inspect a business or organisation that operates across more than one local authority. Where a primary authority has made a plan and LBRO consents to the plan, the primary authority will be required to bring it to the notice of other local authorities. All local authorities will have to follow an inspection plan and inform the primary authority when they inspect a business or organisation in a manner that does not comply with the plan.
Part 3 of the Act will enable ministers to confer new civil sanctioning powers on regulators in relation to specific offences. This will allow regulators to tackle non-compliance in ways that are transparent, flexible and proportionate to the offence.
The new powers include:
- Fixed monetary penalties – these are fines for relatively low fixed amounts intended to be used in respect of low level, minor instances of non-compliance.
- Discretionary requirements - include variable monetary penalties, compliance notices and restoration notices. They are a package of sanctions that may be imposed either separately or in combination. Generally, they should be used as a response to mid to high level instances of non-compliance.
- Variable monetary penalties - can be set by the regulator at a level that removes any financial gain arising from an offence and takes account of factors such as the gravity of the failure and the history of compliance.
- Compliance notices - requiring a non-compliant business to undertake certain actions to bring themselves back into compliance, for example by making good an unsafe piece of equipment, changing a process or providing training.
- Restoration notices - can be used to ensure that a business deals with the consequences of an offence, for example by cleaning up an area contaminated as a result of the offence or reimbursing customers' money. The order giving the regulator power to impose discretionary requirements must also provide for the business to be able to give the regulator an undertaking to take action to benefit a third party affected by the offence, including the payment of compensation.
- Stop notices - require a business to cease an activity that is causing, or presents a significant risk of causing, serious harm. Such activities might, for example, include a manufacturing process, the use of certain equipment or the sale of a particular product.
- Enforcement undertakings - an agreement offered by a person to a regulator to take specific actions relating to what a regulator reasonably suspects to be an offence. For example, a business may undertake to clean up an area that has been contaminated by its non-compliant actions or offer to donate money to charity supporting those who have been affected by the offence.
Guidance on enforcement
Regulators, including local authorities, will be required to publish guidance on the new sanctions (penalty guidance) and how it will enforce offences (enforcement policy). The two forms of guidance may be covered within a single general enforcement policy.
It is the responsibility of a regulator to prepare and publish its own enforcement policy as this sets out how it proposes to enforce certain offences. In relation to penalty guidance, the requirement in the Act concerns only the publication of guidance. The responsibility for preparing penalty guidance will vary depending on the regulatory regime.
Will regulators have to publicise details of any enforcement action?
Regulators will be required (unless exempted) to publish the details of any enforcement action taken. For example, the regulator could attach these details to its annual report or maintain a database on its website.
Part 4 provides for the introduction of a duty on regulators not to impose or maintain unnecessary burdens. The duty requires any specified regulator to review the burdens it imposes in the delivery of its objectives and to remove those which are unnecessary burdens.
One of the major factors likely to impact upon the success of the proposed changes is the approach taken by local authorities to the extended administrative sanctions set out in the Act. There may be some reluctance on the part of local authorities content with existing criminal sanctions to embrace a new and flexible toolkit particularly where injury or death have occurred.
Regulators are also likely to be concerned about additional costs the new regime is likely to bring and potential challenges to sanctions by way of appeal.