A question commonly asked, when the subject of fines levied by the Information Commissioner's Office (ICO), is "where does the money go?" Until now, the answer has been simple – any monetary penalty paid went, in full, to the Consolidated Fund – the Government's central bank account.
However, the ICO has announced that – by agreement with the Department for Culture, Media & Sport and the Treasury – it will now be allowed to retain a proportion (capped at £7.5 million in any year) of the money paid in fines.
It is important to note that monies retained will only be able to be used to cover aspects of the ICO's litigation costs. (These amounted to £155k in 2020/21 and £573k in 2019/20, according to its last annual report.)
The agreement itself explains that the costs covered will include the costs of external experts and counsel, as well as costs of court proceedings themselves, and settlement of adverse costs awards. Funds from fines levied under the related Privacy and Electronic Communications regime can also be retained. Of particular note is that the agreement says that it will cover all data protection legal costs associated with the above, including cases which do not end in litigation.
In recent years, the ICO has been drawn into costly litigation due to controllers appealing fines or enforcement notices. Opponents in such litigation will often have very deep pockets and the ability to retain some fine-derived funds will strengthen the ICO's financial position (and its ability properly to defend itself in court). Similar costs-recovery schemes are already in practice at other UK regulators.
An argument against regulators retaining penalties they impose turns on questions of perceived self-interest: if the regulator has a financial interest in imposing the penalty, might it be more keen to impose one in the first place? This is likely one of the reasons why, according to the ICO's announcement, the scheme will be audited by the National Audit Office.
The news suggests that the ICO will, in financial terms, be much better placed to bring and defend legal proceedings.