Lords amendment: No. 1, page 2, line 20, leave out "him to perform" and insert
or assist him to perform any of".
§ Mr. Mark Todd (South Derbyshire)
I beg to move, That this House agrees with the Lords in the said amendment.
§ Mr. Todd
This group of amendments, of which Lords amendment No. 2 is the most significant, arises from consideration of the Bill in the House of Lords Delegated Powers and Regulatory Reform Committee, which provided a very useful analysis of some aspects of clause 1. The critical element that the Committee raised in respect of this group of amendments was the potential for the clause to be applied more widely, so that it could touch on other aspects of the regulation of co-operative and community benefit societies, not just those related to the activities in clause 1. The intent of this group of amendments is to narrow that purpose, and those hon. Members who have a copy of the amendments available at the Table Office will see that Lords amendment No. 2 specifies how the activities of the individual carrying out such processes should be restricted.
§ Mr. John Randall (Uxbridge)
Although I understand what the hon. Member for South Derbyshire (Mr. Todd) is saying, I confess that I am not a great expert in this subject. Why have the wordsor assist him to perform anybeen included? Lords amendment No. 2 contains a similar phrase, but why are such things restricted to the processes in the clause? I understand that such a change makes the clause less compulsory, but I should like the hon. Gentleman to explain further how it will achieve what he says is its purpose.
§ Mr. Eric Forth (Bromley and Chislehurst)
I must admit that I always have a moment of doubt when such an amendment has to be considered at this late but quite proper stage in the proceedings on a Bill. Indeed, in this case, three such amendments have been grouped together. What worries me are phrases such as "authorise a prescribed person", which appears in Lords amendment No. 2. I say that particularly because it goes on to say that that prescribed person willmake rules, binding on persons".I am not sure that I fully understand why such a rather opaque expression has been written into the Bill. It would help us if the promoter of the Bill gave us his 640 thoughts on who that prescribed person might be, and whether that would vary in different circumstances, to say nothing of the fact that that prescribed person can make the rules binding on other persons of a prescribed description. An awful lot of prescription is going on, about which we have no idea and on which we have no assistance. Trying to be helpful and positive, I suppose, the provision goes on to talk aboutenabling or assisting him to perform any of his functions under the regulations".Again, the problem that we always face at this stage of legislation is that we are asked to approve a framework approach to something that will become clear only when the regulations are published. An element of doubt therefore exists that gives me pause for thought.
The next provision talks about themaking, publication and enforcement of such rules".Again, that is a permissive provision, but it is very wide, and it appears to provide some unrestricted powers in terms of the rules that can be made. These very wide, broad and rather vague provisions contain the potential for quite draconian action, because we are talking about binding rules being made—even if they are for the purpose of enabling or assisting, they are still binding. It would therefore help the House greatly if the promoter told us whom the prescribed person making those binding rules might be. It might also help us to know who are the persons of a prescribed description on whom these rules will bear.
The next rather intriguing provision is to leave out "carrying out" and insert "performing". Perhaps the semantics behind that change are too subtle for me to begin to understand. Clearly, the promoter understands them, and it would help the House enormously if he told us whether this subtle change of wording has some sinister implication, or whether their lordships are merely demonstrating to us that they have a much better command of the language than we do, which we would all find entirely forgivable. I am sure that I, along with the promoter, would defer happily to their lordships in their superior command of the language. If there is any more to it than that, however, it would be helpful to the House to know.
Perhaps the promoter could provide a little more help, give us a little more detail, and—if he could get behind the motivation of their lordships—tell us what he thinks was in their minds when they inserted those provisions. That would help the House greatly.
§ Mr. Christopher Chope (Christchurch)
I very much follow what my right hon. Friend has said. Having looked at the origins of these amendments, we must be grateful to Members of the other place for having made some progress in trying to limit the Henry VIII powers in this Bill. One might almost say that a culture has been developing in recent weeks and in debates in this Chamber, particularly on Fridays, whereby people think that anybody who tables an amendment to a private Member's Bill, however worthy, is somehow to be disparaged and criticised.
Their lordships have demonstrated through these amendments that they were anxious about the original scope of the wording, because a Lords Select Committee was concerned about it. As a result of the amendment before us today, especially the second amendment in the 641 group, I take the point to which the noble Lord Carter referred in the other place that any regulations conferring functionscan only make provision for the specific and limited purpose expressly set out in subsection (1): i.e., they can only set up an asset 'lock-in' regime for community benefit societies".—[Official Report, House of Lords, 13 June 2003; Vol. 649, c. 501.]Clearly, that is better than the previous provision, and for that reason I would be keen to support the amendments.
§ The Paymaster General (Dawn Primarolo)
I support Lords amendments 1 to 3.
Clause 1 allows the Treasury to bring forward in secondary legislation regulations enabling community benefit societies to adopt a lock-in over their assets, so that their assets cannot be used or dealt with other than for the benefit of the community, except in such cases as may be prescribed in the regulations, such as insolvency.
An asset lock-in regime for community benefit societies was one of the key proposals of the strategy unit report "Private Action, Public Benefit". The Government support the principle of such a regime and can see the benefits that it could bring to community benefit societies and to the economy as a whole. However, an asset lock-in regime would require detailed work and consultation to get the policy right, and to reflect the needs of the sector and other stakeholders. That is why we support an enabling clause, rather than bringing forward a substantive asset lock-in regime in this Bill.
The Government are committed to taking forward an asset lock-in regime. To ensure that the asset lock-in regime is sufficiently robust to give societies the certainty that their assets will always be used for the community benefit, it may be necessary to appoint a body to perform supervisory or regulatory functions. The body may also need to make binding rules to help maintain compliance with the regime. For this purpose, the clause enables the Treasury, through regulation, to confer rulemaking powers on a prescribed body under clause 1(5)(d).
Although any regulations made under clause 1(1) could only make provision for the purpose of setting up an asset lock-in regime for community benefit societies, the Lords Delegated Powers and Regulatory Reform Committee expressed concern that such a delegation would be appropriate only if it were to be expressly limited to a specific purpose. To address the Committee's concern, the amendments made in the other place narrow the scope of clause 1(5)(d), so that the regulations can only authorise a prescribed person to make binding rules for the purpose of enabling or assisting him to perform his functions under the regulations. That expression is not new in the Lords amendment: it was already in the provision in the form in which it left the Commons. All that the amendments do is narrow the rule-making power from the wider version in the previous Bill. "Prescribed" is defined as meaning prescribed by regulations. Thus, the amendments made explicit that any rule-making powers conferred on a supervisory body will be directly related to the implementation of the asset lock-in regime.
642 Lords Amendments Nos. 1 and 3 made further minor amendments for the purpose of consistency with Lords amendment No. 2. Lords amendment No. 2 uses the phrase "enabling or assisting" whereas clause 1(4)(h) as it left the Commons merely used the word "enable". Lords amendment No. 1 alters this to "enable or assist" for the reasons that I have given to the House in terms of making explicit the provisions of the Bill. Lords amendment No. 2 alters clause (1)(5)(d) so that it uses the phraseto perform any of his functions",whereas clause (1)(5)(e) as it left the Commons used the phrasecarrying out any of his functions".Lords amendment No. 3 alters "carrying out" to "performing". Each of those narrows down the specific points in the Bill. The Government support the amendments.
§ Mr. Randall
Lords amendment No. 2 contains the word "perform", so I presume that amendment No. 3 echoes that with its use of the word "performing". Can the Paymaster General enlighten me about whether there is any difference in meaning between "performing" and "carrying out"? Would it have been possible to use the words "to carry out" in amendment No. 2 or is there a legal difference between the two terms?
§ Dawn Primarolo
I understand that there is no legal difference. The hon. Gentleman is right in the sense that alternative words could have been used. The changes have been made to ensure consistency of terminology between Lords amendment No. 2 and the other provisions in clause 1. The other place decided that it preferred a narrowing of powers on the specifics that the Bill addresses, and the other amendments are about consistency of terminology. That is always desirable to help people when they read such a Bill. The Government are happy to support the amendments.
§ Mr. Todd
My right hon. Friend has provided an extremely elegant explanation of some of the textual issues. That responds to some of the points made about the precise choice of words.
If we dwell for a moment on the broader context of the clause and the reasons for this narrowing amendment, we realise the asset-locking provision, which is a key part of the Bill, is designed not to restrict the rights of certain citizens but to facilitate the ability of citizens who form themselves into community benefit societies to protect that particular asset so that it can do the purpose for which it was originally set up. The provision is not designed to restrict individual freedoms. As I explained on Second Reading, I deliberately chose this Bill as I was seeking one that would not restrict individual freedoms but would facilitate the means by which people could co-operate safely and in a manner that protected the purpose for which they established their venture.
It is also important to emphasise that there will be a lengthy consultation process on exactly how the regulations will be drawn up. The clause facilitates that process, so there will be many opportunities for 643 Members of the House and those who are directly interested in the regulatory framework for community benefit societies to comment on the process and on the regulations that any Government might choose to lay before the House. Decisions on regulations will be determined by an affirmative vote in the House, and that will give Members a further opportunity to debate them in more detail should they wish to do so.
I am grateful for the comments of the hon. Member for Christchurch (Mr. Chope). The other place performed a service in identifying the potential to narrow a little further and sharpen the purposes of the clause. I commend the amendments to the House.
§ Lords amendment agreed to.
§ Lords amendments Nos. 2 and 3 agreed to.
Lords amendment: No. 4, in page 2, line 38, at end insert—
() Regulations under this section may not create any new criminal offence punishable with imprisonment for more than seven years.
§ Mr. Todd
I beg to move, That this House agrees with the Lords in the said amendment.
The purpose of this amendment is perhaps more explicit than that of the first group. It illustrates the concern of the Delegated Powers and Regulatory Reform Committee about what might stem from the clause should the Government proceed to consult on and publish any regulations. Those regulations would, in certain circumstances, impose penalties on those who are in breach of them. I raised questions on this issue earlier in our proceedings on the Bill, and I can certainly sympathise with the view taken in the other place that there should be a clear restriction on the penalties that could be imposed under the clause. The amendment, therefore, readily commends itself to the House.
§ Mr. Chope
I am grateful to the hon. Gentleman for the way in which he moved the amendment, but he has failed to explain why he thinks that seven years is reasonable. The justification that Lord Carter gave in the other place for having seven years as the maximum term for imprisonment was that, once the Bill is enacted, it will be possible for offences to be committed that are tantamount to fraud or theft. Therefore, the maximum penalty should be commensurate with the gravity of an offence of fraud or theft. However, an offence of fraud or theft already carries a maximum penalty far in excess of seven years. An officer or member of a co-operative or community benefit society who is guilty of theft or fraud should surely be prosecuted under the provisions of the Theft Acts and be exposed to the maximum penalties stipulated in that legislation. The justification for this delegated regulatory power, which would give the Government the power to introduce a maximum penalty of seven years for offences that might be quite trivial, is slightly specious.
§ Mr. Forth
Is my hon. Friend prepared to go a stage further? The people who could be defrauded are members of co-operatives and community benefit societies and, I think it is fair to say, they are usually some of the weaker and more vulnerable members of 644 society. Therefore, if anything, we should give them even more protection. It is bad enough for people to defraud large corporations, but to take advantage of the people covered by the Bill would surely be even worse. Is there not an argument for strengthening rather than weakening the provisions?
§ Mr. Chope
I take my right hon. Friend's point. My concern is that, by specifying a maximum of seven years for offences that are tantamount to fraud or theft, a reasonable person—perhaps a member of a co-operative or community benefit society—might ask why Parliament and the Government think that theft and fraud from such a society's funds is a less serious offence than theft or fraud from an organisation in the public or private sector. Lord Carter"s justification for the seven-year maximum could send a confused message to those outside who might think that we do not take seriously fraud or theft in relation to co-operative or community benefit societies.
Lord Carter was probably seeking to accept the detailed recommendation of the Delegated Powers and Regulatory Reform Committee. Before the amendment was tabled, it was concerned that the Bill contained powers to make regulations creating new criminal offences without specifying the maximum penalties for those offences. On 13 June, the noble Lord seemed to be reluctant to accept the Committee's recommendation. He said thatthere are precedents for a power to create criminal offences in secondary legislation that do not specify a limit"—[Official Report, House of Lords, 13 June 2003; Vol. 649, c. 502.]He cited the Industrial and Provident Societies Act 2002 as a precedents and although it was obviously an oversight that no limit was included in that Act he was reluctant to accept that. He tried to give the impression that he had complied with the Committee"s recommendations by suggesting a maximum penalty, although I think that it is very high. The ability to impose a maximum penalty of seven years under delegated legislation, which cannot be amended, is a pretty draconian power to give to a regulatory body or the Government. However, a limit of seven years is better than no limit at all, as the Bill originally provided, so I find myself slightly confused. When the hon. Member for South Derbyshire (Mr. Todd) sums up, I hope that he will explain why seven years is absolutely the right time period.
§ 10 am
§ Mr. Forth
I was about to agree with my hon. Friend the Member for Christchurch (Mr. Chope) but when he finished I thought, "No, this won"t do at all." I shall not allow him to slip into the debate as easily as that and try to get all heads nodding by saying that any limit is better than no limit at all. He did not justify that statement, which was rather unusual of him, but left it as though it were received wisdom. Frankly, the amount of wisdom received in this place is usually pretty limited and even when it is offered by my hon. Friend, with all his legal expertise, we should at least ponder it.
We could dwell on the decision to choose a period of seven years for quite some time, although it would not be especially productive. It is always interesting to 645 consider why great minds alight on such periods, especially because there is ample evidence that similar offences carry rather different maximum penalties, as my hon. Friend said. I hope that the combined wit and wisdom of the Minister and the promoter of the Bill will be sufficient to explain why, if my hon. Friend"s analysis is right, the provision would distinguish between offences committed under the Bill and similar offences, and why seven years was picked. A bit of an explanation of that would help us out.
Why is a maximum penalty being introduced at all? I am tempted to engage in a modest dissertation on whether the House should impose maximum penalties or leave that to the discretion of the courts or the judiciary, although I shall not allow myself to do so because I could stray a little wide of the amendment. Although the amendment might appear modest, it gives rise to consideration of the complex relationship that inevitably exists between the House creating framework legislation, the role of the regulations that underpin that framework, and the judicial process.
Additional information would be useful before the House rushes headlong into accepting the amendment. What do the Minister and, perhaps more importantly, the promoter envisage as the role of the provision? To pick up on what my hon. Friend the Member for Christchurch said, why is there need for a maximum penalty? As I said in my intervention, which I hope will not be brushed over too lightly, why is the Bill apparently more restrictive than other measures? I assume that the hon. Member for South Derbyshire (Mr. Todd) wants to assist the co-operative movement and community benefit societies, so why on earth does he apparently want to introduce lower penalties than those that might apply in the profit-making world of commercialism? I know how well qualified he is to comment on such matters, so his views would assist the House.
§ Mr. Randall
My hon. Friend the Member for Christchurch (Mr. Chope) and my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) demonstrated why it is sometimes good to step back and think for a while. As my right hon. Friend said, we sometimes consider amendments that appear harmless, and there is almost an inclination to nod them though, especially on Fridays. That is regrettable because we are, after all, making law. When our constituents write to us about our consideration of private Members' Bills, they forget that such Bills actually create law and, indeed, that some create criminal offences.
I am rather confused about how the maximum limit of seven years was decided. My hon. Friend the Member for Christchurch talked about sending the message that a crime against a co-operative society might be considered less important than others, although I am sure that that is not the intention of the Bill. It could be possible that committing such a crime might lead to prosecution for further offences that could invoke a longer sentence.
I am always a little surprised by the way in which society"s view seems to waver on whether we should sentence more or less. I plied my trade as a retailer before coming to the House and I remember when the then shadow Home Secretary—he is the Prime Minister now—said that shoplifting was not a serious offence. I 646 was biased at the time, but many of us in the retail trade believe that the offence takes away profit and thus people"s livelihoods. The Prime Minister made his comments at that time to imply that there would be a new, liberal regime, but things have moved on and we now have a Home Secretary who is more intent on locking people up.
Perhaps the promoter of the Bill or the Paymaster General will provide us with further explanation. Financial punishments might be more appropriate for such offences, so perhaps the amendment should set out levels of fines. Are those who commit such offences the sort of people who should be sent to our already overcrowded prisons? Now is not the time for a lengthy dissertation on whether we should leave such matters to the judiciary, but I would like a little more information about how the decision to use a seven-year period was reached and whether there are any provisions for financial penalties under the Bill.
§ Dawn Primarolo
It is important that a society's asset lock should be sufficiently robust to provide investors and society itself with the confidence that its assets will be used only for the benefit of the community. For that reason, it may be necessary to impose criminal liability on persons breaking asset-lock regulations. Penalties are already part of the legislative framework governing societies, and are an important part of the checks and balances that protect the interests of societies, their members and those who deal with the sector. The Bill currently places no limit on the maximum penalty that can be prescribed for any criminal offences created to enforce the asset lock-in.
The right hon. Member for Bromley and Chislehurst (Mr. Forth) raised a pertinent issue. He is wearing his United States tie—he brings it out once a year on American independence day, and I am glad to see it in the Chamber today—and made a point about balancing the rights of people in society, people who depend on its resources and, indeed, people who may break the rules, which are designed to protect members" interests. He was right to touch on that point, which was also dealt with by the Delegated Powers and Regulatory Reform Committee. It considered the delegation of powers in clause 1(5)(a), and an amendment was introduced in the other place to address its concerns by limiting the maximum penalty that can be imposed under the regulations to seven years" imprisonment.
A number of hon. Members asked why that limit was imposed. Prior to consultation, it is not certain exactly what criminal offences may be created under clause 1 (5)(a), so it is important that the maximum penalty should be sufficiently high in light of the seriousness of offences that may be created and the current maximum sentences for similarly serious offences. The maximum penalty of seven years" imprisonment is the maximum penalty for analogous offences in company law—there is no reason why people in societies should be any less protected than people protected by company law—and the law relating to charities. There are therefore examples of the seven-year penalty. For example, seven years is the maximum penalty that can be imposed on persons who are knowingly party to the carrying on of any business of a company for a fraudulent purpose. The maximum punishment for the theft of a charity"s assets is seven years" imprisonment.
647 Those offences are comparable in seriousness to an offence that may be created in regulations made under clause 1—an officer of a society fraudulently using the assets of a society for purposes not permitted by its asset lock, whether for personal gain or otherwise. Clearly, if offences created under the regulations are less serious, that would be reflected in a lower maximum penalty. However, the amendment made in the other place represents, as the right hon. Member for Bromley and Chislehurst suggested, an appropriate restraint, given those examples of analogous offences, on the delegated power to make regulations. For those reasons, I am glad to give the Government"s support to the amendment, and recommend it to the House.
§ Mr. Todd
I thank my right hon. Friend the Minister for her explanation of why seven years was chosen as a maximum penalty. It raises an issue that arose earlier in our consideration of the Bill—there is a desire to place co-operative and community benefit societies on the same footing as companies in their response to threats that they may face. That has been a consistent strand in our debates, so I can understand why Lord Carter recommended, albeit hesitantly—I am sure that the hon. Member for Christchurch (Mr. Chope) is right—acceptance of the Lords amendment.
It is also worth saying that the outcome of the consultation cannot be predicted. We are dealing with a narrow group of potential offences—they relate specifically to the abuse of an asset lock on a society, and do not generally relate to fraud in the society, which is covered by other legislation—so it is difficult to predict precisely which offences will be defined after the consultation has concluded. Flexibility is therefore needed, and it may be suggested that financial penalties are more appropriate in certain circumstances. With that in mind, I commend the amendment to the House.
§ Lords amendment agreed to.