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That the Grand Committee do consider the Criminal Justice
and Police Act 2001 (Powers of Seizure) Order 2018.
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The Parliamentary Under-Secretary of State, Department for
Business, Energy and Industrial Strategy (Lord Henley)
(Con)
My Lords, I congratulate the noble Lord, Lord Stevenson,
who is still with us for the third item of business. I am
grateful for the feedback from the Secondary Legislation
Scrutiny Committee regarding the explanatory material
accompanying this draft order. We always strive to provide
sufficient information for noble Lords to gain a clear
understanding of an instrument’s policy objective and
intended implementation. Furthermore, my department will
take account of the comments of noble Lords made in this
Committee when preparing explanatory memoranda for future
instruments.
Insider trading and price manipulation in the wholesale
energy markets is a crime and ultimately consumers and
businesses pay the price for such behaviour in the form of
higher bills. It is therefore important that the energy
regulator in Great Britain, Ofgem, has sufficient powers to
investigate and punish those behaving in such a way and
that that acts as a deterrent. Insider trading and market
manipulation in the wholesale energy markets are prohibited
by the wholesale energy market integrity and transparency
regulation—REMIT —which has been in force since December
2011.
In June 2013, the Government made civil enforcement
regulations for REMIT—the Electricity and Gas (Market
Integrity and Transparency) (Enforcement etc.) Regulations
2013—which give Ofgem powers to impose unlimited financial
penalties, access to information and the power to enter the
premises of a regulated person under a warrant. In March
2015 the Government strengthened that regime by making
further regulations to create criminal offences of
intentionally or recklessly breaching the prohibitions on
insider trading and market manipulation.
The 2013 regulations give the regulator the power, under
warrant, to enter premises to search for, and seize,
information and documents that appear to be relevant.
However, there are cases where Ofgem may have difficulty
exercising this power of seizure. Investigating officers
may be presented with a large volume of documents.
Identifying documents relating to suspicious transactions
among many documents of a similar nature can be akin to
finding a needle in a haystack. Ofgem currently has no
power to take away an entire body of documents to sift them
for relevance off premises. In some cases, this may mean
that vital evidence is missed.
Section 50 of the Criminal Justice and Police Act 2001
addresses this problem. It enables a person exercising a
power of seizure to remove material from the premises being
searched to determine whether it is something which the
person is entitled to seize if it would not be reasonably
practicable to determine that on the premises. The power in
Section 50 applies where a person is exercising a power of
seizure listed in Schedule 1 to the Criminal Justice and
Police Act. More than 60 such powers are already listed in
the schedule. The effect of this order is to extend this
power to Ofgem when it is searching premises to investigate
breaches of REMIT. The Government believe this would be a
measured and sensible extension of Ofgem’s powers, which
will help to ensure it can take effective enforcement
action.
The Government sought views in December 2015 through
consultation on whether Ofgem’s powers should be
strengthened to bring them into line with this provision.
Industry stakeholders, perhaps not surprisingly, believed
that the additional powers offered to Ofgem were
disproportionate. Others, including consumer groups, were
neutral or in favour of the provision. The Government
believe that effective regulation in this area is essential
and that sufficient safeguards will be in place to meet
stakeholder concerns. The Government do not believe that
costs will be unreasonable.
The power will apply only where a court has granted Ofgem a
warrant to search premises. When Ofgem exercises this power
it will be under a statutory duty to sift information as
soon as reasonably practicable after seizing it and return
anything which it was not entitled by the warrant to seize.
Additionally, a person who is the owner of a document can
apply to the court for the return of such material.
We believe that this additional power will aid Ofgem in its
investigation of market abuse and that the safeguards
should ensure that it is not used unnecessarily. I commend
the order to the Committee. I beg to move.
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(Lab)
My Lords, I thank the Minister for his full introduction to
this order. Again, we have no significant concerns about
the order itself because it is an appropriate way forward.
Indeed, it seems to be needed, based on the description we
have had.
As the Minister has said, the Secondary Legislation
Scrutiny Committee reported on the order in order to draw
it to the attention of the House on the grounds of a policy
likely to be of interest. The committee’s main concern
seems to be about the rather extended time taken to go from
the initial idea booted around in the consultation paper in
December 2015 to the final decision to move forward on a
part of what was consulted on—only a part—as late as
earlier this year. The Minister said that the issues raised
will be taken back with everything else, but he did not
give us an explanation about that issue. The letter from
the department that covered it is also rather vague. It is
mainly to do with the fact that internal government
processes got in the way of the smooth running of the
overall proposal and that the decision was taken quite late
simply to go ahead with these REMIT proposals. More
information about that would be of interest.
My concern is slightly different. The consultation that was
carried out was broader than the REMIT, but the Explanatory
Memorandum focuses on those issues. I take it that the
references in Article 8 of the Explanatory Memorandum are
around that. It says in paragraph (8.2):
“Some energy companies expressed support for the initially
proposed “seize and sift” powers, but the majority of
companies and representative groups”—
so it is not quite as the noble Lord mentioned—
“argued that these were disproportionate, unnecessary or
gave Ofgem too much leeway on which information to remove”.
In other words, they were about the powers. It seems to me
that the majority of companies did not agree with the
proposal. They felt that the existing powers would be
sufficient and that seeing papers on sight, sifting through
them there and taking information away in that form would
be sufficient for their processes. In paragraph (8.3)
however, the department’s response states:
“Having taken account of the consultation responses, BEIS
considers that the aim of the policy … justifies the
additional burdens identified by industry”.
They were not complaining about the burdens, but the
powers. The Explanatory Memorandum is completely silent on
whether these powers are appropriate. It seems that the
Government have decided to ignore the consultation and go
ahead. Will the Minister comment on that? He is not wrong
in the sense that the ends may justify the means, but the
process would have left a number of companies a bit
bruised, given the very short time available and the lack
of any individual consultation. They would be entitled to
feel that they have not been taken account of properly.
Finally, I have to come back to the matter of the
implementation date. This is a new group of civil servants
and I can expand on my worries. Other noble Lords will
realise that I have raised this matter before. This order
may be cited from, and comes into force on, the
“twenty-first day after the day on which it is made”. It
will have a considerable impact on a small number of
companies operating in the electricity and gas field. It is
therefore not inappropriate to think that the order should
start from the common commencement date: 6 April. If you do
the maths, 21 days takes you just beyond 6 April. It would
be not inappropriate if the Minister decided to suggest,
even with the regulation in this form, that 6 April would
have been a better date, and I appeal to his better
judgment to make the necessary changes if he can.
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In considering this order we should consider the enormous
public dissatisfaction with some of the regulated
industries that we have seen for a long time. I think I am
correct that the regulators have often been caught out
saying that prices should be allowed to rise by a certain
amount, and immediately after the announcement, companies’
share prices have risen. To me, this means that the
regulator has misjudged the situation. Bodies such as Ofgem
are extremely powerful, and from the point of view of the
consumer and the general public it is important that a very
close watch is kept on their activities. I am happy to
support what is in this paper because the balance of
advantage between consumer and supplier is tilted very much
one way, and this will tilt it back the other way.
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My Lords, I think that I am grateful to the noble Lord,
, for his comments.
It is always difficult to get the balance right in these
matters, which is what we are trying to do in a number of
other pieces of legislation—as the noble Lord will be
aware—that are before another place at the moment.
It is important that we ensure that Ofgem has the
appropriate powers to look after the consumer interest.
Obviously, we take very seriously the idea of any extension
of powers that we might grant to Ofgem or any other body,
and that is why, under the Police-and-whatever-it-is Act
2001, we have to make an order if we want to do that. They
are affirmative orders and we have to come to the House to
argue the case for them. That is what I am doing.
The noble Lord, Lord Stevenson, was slightly worried about
the consultation and whether we listened to the consultees.
What I said in my opening remarks was that the industry and
stakeholders, perhaps not surprisingly, believed the
additional powers were disproportionate, but I added that
others, including consumer groups—this is the point that
the noble Lord, , picked up—were
neutral or in favour of the provision. The Government have
to consider these matters very carefully.
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Just to be clear, paragraph 8.2 of the Explanatory
Memorandum does not say what the Minister just said. It may
just be that the expression needs to be changed, but it
states,
“the majority of companies and representative groups”.
I think “representative groups” includes consumer groups.
The Minister said there were others, but we do not have the
detail. They,
“argued that these were disproportionate, unnecessary or
gave Ofgem too much leeway”.
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It does not just include consumer groups. The point I was
making was that consumer groups in particular were neutral
or in favour. Having listened to the consultation, the
Government came to their conclusions and decided what was
necessary. We considered that the powers were very
important and we considered bringing them in with
appropriate safeguards. I think that is what we have done.
The noble Lord was concerned about the timing of the order.
I am glad that it was not just me listening to him. As he
said, there is a collection of officials listening behind
me, and I hope this will suffuse through the department so
that all of us—Ministers as well as officials—can be aware
of his concern that as far as possible we stick to the
appropriate dates. Obviously, there will be other occasions
when we cannot. I have no power to make amendments now. The
noble Lord probably guessed that, since he made the
suggestion. Since I have general agreement that this order
should go through, I repeat that the department could
possibly do better in future. I will keep my beady eye on
these matters and see to it that we do as well as possible.
As I said at the beginning, we will continue to take the
Committee’s views into account in future.
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I go back to my original point and ask the Minister, for my
comfort and satisfaction, to write with a bit more
explanation about the make-up of the responses that were
received. May I also welcome the Minister to the small band
of people who believe in common commencement dates?
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The noble Lord will get a reputation for having a bee in
his bonnet about common commencement dates and will, no
doubt, be teased by his colleagues as “Lord Common
Commencement Dates” for ever. I will certainly write to him
in greater detail on the other matter. I am grateful for
the support from both noble Lords.
