Select Committee on Regulatory Reform Fifth Report

Aspect (b): replacement of the phrase "as agent"

  27. The Department considers that the use of the phrase "as agent" is no longer appropriate, as it does not adequately reflect the liabilities of the authority and the contractor manager. The use of "as agent" may limit the extent to which the authority can exclude its liability and ensure that the manager remains liable for the matters specified by the agreement. The Department believes that this limitation is "clearly not correct".[17] The authority has overall responsibility for ensuring that the services are delivered, but the manager must take on the risks and responsibilities of providing the services themselves (a crucial aspect of PFI contracts). This may become more critical where work is being sub­contracted, the Department suggests, because of a greater need to differentiate liabilities.[18]

28. The proposed order would remove the words "as agent" from section 27, and instead insert new subsections (13) and (14). These new subsections are similar to subsections (2) and (3) of the Deregulation and Contracting Out Act 1994, which the Department describe as "the currently recognised approach to dealing with liabilities."[19]

29. However, the explanation of the intended effect of these new subsections in the explanatory statement is unclear, and potentially misleading, as acknowledged in the later memorandum from the Department. A more accurate explanation is given later in that memorandum, as follows:

Under the proposed subsection (13) the housing authority remains accountable and legally liable for the acts and omissions of a manager just as they are accountable and legally liable for acts and omissions of their officials.

The proposed subsection (14) only removes the liability of the authority where the delegated manager is liable for a criminal action or where, under the management agreement, in accordance with the ordinary rules of contract, the manager is to be responsible, as between itself and the authority, for any act or omission. [20]

We consider the clarity of these particular provisions in paragraph 59 below.

Further points in connection with the proposals


  30. The Department emphasises that, in considering what changes would be necessary, it was mindful of the need to ensure that tenants' rights—such as those rights under Right to Buy, Right to Manage[21] and rights to consultation—were not in any way affected; and that the proposed order has been drafted with this principle in mind. Guidance has been drawn up on tenant consultation.[22]


  31. The Department is also keen to stress the need for the urgent implementation of these proposals. The reason for urgency is that a number of "pathfinder" authorities have already been pursuing PFI projects for their council properties, and will shortly be in the position where they will wish to sign contracts. Interim arrangements have been formulated which will enable those projects to go ahead in the short term, but those arrangements are not considered satisfactory for the long term, and so it is intended that the changes which would be made by this proposed order should be implemented as soon as possible. Further details of the need for urgency, and of the proposed interim solutions (which do not form part of this proposed order), may be found in Chapter Five of the explanatory document.

Adequacy of the explanatory statement

  32. Before we move on to our assessment of the proposal against the Standing Order criteria, we have the following comments to make concerning the adequacy of the explanatory statement which accompanied this proposal. The Department's explanation of the way this proposed order would work, its consideration of the statutory tests, and its assessment of the implications of the proposed order was deficient to an unacceptable extent. When a proposal for a regulatory reform order is laid before Parliament, there will almost always be some points which require clarification before we are able to complete our consideration and report to the House. We do not consider it acceptable, however, to be obliged to ask twenty-one separate questions about a proposal which is not, in fact, of any very great complexity.[23] The inadequacy of the explanatory statement was a major factor in our decision to call for oral evidence from the Minister.

33. It is our duty to ensure that proposals for regulatory reform orders receive the degree of scrutiny appropriate to proposals to make changes to primary legislation. For this to be possible, the explanatory statement must provide an analysis which clearly explains the effect of the proposed order and specifically addresses the requirements of section 6(2) of the Regulatory Reform Act. We therefore expect departments to be far more rigorous in the explanatory statements accompanying future proposals for regulatory reform orders than has been the case in this instance.

17   Explanatory statement, para 4.8. Back

18   ibidBack

19   Explanatory document, page 32. Back

20   Appendix B, section A7 (emphasis added). Back

21   See Annex B to Appendix B. Back

22   See Annex F of the consultation document. Back

23   See Appendix A. Back

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