Penalties for getting it wrong is backward step

Proposals to hand out penalties to firms in breach of regulations is a backward step and could lead to small firms experiencing a breakdown in their relationship with the regulators, according to a small business pressure group.

The Macrory Review, commissioned by the Government, is looking into the reform of regulatory sanctioning regimes. It ends its first consultation period this week, with the final report expected later this year.

Led by Richard Macrory, Professor of Environmental Law at University College London, the review found that the current system is heavily reliant on criminal prosecution. The interim report, published in May, proposed that the use of administrative fines and other non-criminal penalties, could resolve some cases more quickly and effectively.

Nick Goulding, the Chief Executive of the Forum of Private Business (FPB), said a penalty system could make enforcement of regulations more difficult.

He said: "The outcome is likely to be that owners and managers of smaller businesses experience a breakdown in their working relationships with regulators.

"They are bound to feel more adversity towards officials, where in the past they have felt able to turn to them for useful advice."

Serious concerns

The FPB supports some of the Macrory Review's proposals, but believes the danger with enforcing penalties on firms is that the system would be open to abuse.

Mr Goulding said: "We agree that criminal prosecution should be reserved for serious offenders and where regulatory breaches lead to severe consequences.

"We are seriously concerned that sanctions will be imposed for administrative errors which have no bearing on safety. The system would also be open to interpretation by individual officers, meaning that standards of enforcement would vary from business to business."

More penalties

Some smaller firms are cynical about the introduction of more penalties, they believe authorities may be tempted into setting them targets in terms of the number of fines they hand out.

Colin Merchant is Managing Director of MBH Industrial Services Limited in Somerset. The company has been in the heating, ventilation and air conditioning business for 27 years, but Colin says they are now snowed under by ridiculous red tape.

"Our biggest gripe is that we are overwhelmed with regulations. Some of them are ridiculous and costing us thousands of pounds, you can't see the good rules for the bad."

He says sooner or later most firms would be caught out for something because they cannot cope with changes in regulation.

"We spend thousands on training our staff which we then have to update a few years later. I have lost experienced people who have quit the job after years because they couldn't face the prospect of more exams."

Proportionate

The FPB is also calling for any proposed fines to be proportionate to the nature of the offence. Mr Goulding said small firms complain that is not the case at the moment.

He said: "Firms who are keen to improve standards shouldn't be treated in the same way as rogue businesses, flaunting regulations.

"There appears to be nothing in the Macrory Review that addresses the regulator that does not behave properly and no provision for dealing with incompetent officials. Can the Government say that it has none of those?"

The FPB is calling on the Government to look at the wider picture and move away from the assumption that it is only the "rogue traders" that flout regulations.