House of Commons - Regulatory Reform

Select Committee on Regulatory Reform First Report

3 Assessment of the Proposal against the Standing Order No. 141(6) criteria

8. The Proposal for a Regulatory Reform Order, though self-contained, is made against the background of possible primary legislation, possibly to create an autonomous statutory UK-wide non-departmental public body[11] but almost certainly to include extending some of JNCC's functions to Northern Ireland, reviewing its constitution to give the two Northern Ireland observers voting rights and increasing the number of independent members.[12] The Committee has noted before that it would "reserve judgment" on the principle of splitting legislative proposals into bills and regulatory reform orders.[13] We consider that this Proposal appears to be appropriate for delegated legislation.

Removal and reduction of burdens

9. Defra identifies four burdens under the existing legislation:

(i) inability to employ staff, etc.

(ii) limit on power to delegate

(iii) inability to seek direct funding

(iv) inability to conclude work on remuneration of members and chairman, etc.

INABILITY TO EMPLOY STAFF, ETC.

10. Defra says that the requirement in paragraph 7 (1) of Schedule 7 to the 1990 Act that the country bodies provide JNCC with staff, accommodation and other facilities imposes a burden on JNCC and that this is an impediment to JNCC carrying out its statutory functions.[14] According to Defra, many of the administrative procedures are unduly complex and JNCC is unable to make decisions on some fairly routine issues without involving the country bodies. In particular, the requirement arising from paragraph 7(1) of Schedule 7 to the 1990 Act that staff working at JNCC must be employed by one of the country bodies (English Nature, Scottish Natural Heritage or the Countryside Council for Wales) increases the complexity of and adds to the costs of human resources (personnel) services to both the country bodies and JNCC. At present, JNCC has staff working side by side, doing similar work, engaged on different terms and conditions. Removing the requirement under the 1990 Act for the country bodies to provide staff, and enabling JNCC to do so itself, either directly, or through a company limited by guarantee, would allow all staff working at JNCC to be employed on a consistent set of terms and conditions.

11. Article 4 of the draft Order allows for the setting up of a company limited by guarantee to facilitate the employment of staff (JNCC being an unincorporated public body) and the provision of other corporate services and is a part of the means by which this burden would be addressed. The burden of having to rely upon the provision of staff on secondment would be removed, and such a company could be used to ease the fulfilment of some of its administrative and corporate support needs by providing a contracting body.

12. We agree that the requirement on the country bodies to provide staff, accommodation and facilities to JNCC imposes a burden which affects JNCC and would be removed by the Proposal.

LIMIT ON POWER TO DELEGATE

13. Defra identifies a restriction of the power to delegate in paragraph 9(1) of Schedule 7 to the 1990 Act, which allows JNCC to delegate functions to employees of the three country bodies.[15] Under the Proposal, the scope for delegation would be extended to include employees of JNCC, or of a company limited by guarantee formed by it, and such a company itself.

14. Defra describes this restriction as a further burden, incidental to the burden of JNCC's inability to employ its own staff described above. In our view, the provision in Article 4(4) of the proposed draft Order may be better regarded as using the power in section 1(6)(c) of the Regulatory Reform Act to make incidental or supplemental provision to the Proposal.

INABILITY TO SEEK DIRECT FUNDING

15. Defra says that the current requirement arising from section 129 of the 1990 Act that all funding must be made via the country bodies places a burden on JNCC in that it cannot seek direct funding for work it undertakes on UK-wide matters where there is no specific individual or collective responsibility.[16] At present the only way that core funding can be supplemented by Government is by making payments via the country bodies adding administrative complexity by 'double handling'.

16. We agree that the requirement to fund Government activities carried out by JNCC via the country bodies amounts to a burden on central government which affects JNCC in the carrying on of its activities and adds complexity to the administrative arrangements of the country bodies and would be removed by the Proposal.

INABILITY TO CONCLUDE WORK ON REMUNERATION OF MEMBERS AND CHAIRMAN, ETC.

17. The Proposal would allow JNCC to deal directly with the pay, pensions and related issues of those members of JNCC who are appointed as 'independents' by the Secretary of State without (as is necessary at present) having to do so via the country bodies. Defra says that this would remove an unnecessary layer of administrative complexity which is an impediment to JNCC carrying out its statutory functions efficiently.[17] In our view this part of the Proposal would remove burdens from the country bodies and impose them on JNCC.

New burdens and proportionality between burdens and benefits

18. It is up to the Government to justify any new burdens proposed and to satisfy the Committee that a Proposal satisfies the condition of proportionality between burdens and benefits set out in section 1 of the Act and the fair balance and desirability tests set out in section 3. Defra argues that its Proposal does not create any new burdens, but would re-allocate to JNCC a series of functions or obligations, such as employing staff and providing remuneration, which currently fall on the country bodies collectively.[18] Defra listed these obligations —

the employment of staff working at JNCC;
payment of remuneration and other allowances to those staff;
payment of pensions for those staff and former employees ;
the maintenance of pension schemes;
the provision of accommodation and other facilities for JNCC;
payment of remuneration, pensions, allowances and gratuities to JNCC's Chairman, three independent members, all appointed by the Secretary of State, and two non-voting members.

19. Defra added that if the option of setting up a company limited by guarantee were to be used, JNCC would also be obliged to take responsibility for the company's governance and ensuring it met the requirements of the Companies Acts.[19]

20. The Committee asked Defra what consideration it had given to whether the imposition of these obligations satisfied the conditions of proportionality between burdens and benefits set out in section 1 of the Regulatory Reform Act 2001 and the fair balance and desirability tests set out in section 3 of the Act.

21. Defra argued that the central object of the proposed reform was to remove the burden JNCC faced in not being able to employ its own staff, or to do a number of ancillary things for itself. The burdens to be removed were the limitations on JNCC's powers preventing it from being able to do these things. Giving the responsibility to JNCC would be lifting a burden (in the sense of section 2(1)(b) of the Regulatory Reform Act), rather than imposing one. In Defra's view, being responsible for such matters as paying the employees and maintaining a pension scheme for their benefit was clearly consequentially related to being able to employ them.[20]

22. Where obligations were to be "transferred" to JNCC, the safeguarding roles of the Secretary of State and Treasury would in each case be preserved. These safeguards were seen by Defra as a limitation on the powers conferred, and thus burdens, either new or re-enacted, in terms of the Regulatory Reform Act.

23. Defra was satisfied that, as well as offering necessary protection, these limitations were proportionate as they reflected the 1990 arrangements, JNCC was content to be subject to them, the benefits they would provide by way of safeguards were desirable, and it would be inappropriate for JNCC not to be subject to similar safeguards in respect of staff numbers and payments as the country bodies would continue to be in respect of their own employees under Schedule 6 to the 1990 Act, or under Schedule 1 to the Natural Heritage (Scotland) Act 1991 in respect of Scottish Natural Heritage. Defra was satisfied that for the same reasons their inclusion would maintain a fair balance between the public interest and the interests of JNCC, which would be subject to the new or re-enacted burdens. Defra also considered that, having regard to the benefits arising from the removal of the central burden on JNCC, it was desirable that the Order should be made as in the Proposal.[21]

24. In the light of Defra's responses to the Committee's questions, we agree that the Proposal satisfies the conditions of proportionality between burdens and benefits set out in section 1 of the Regulatory Reform Act 2001 and the fair balance and desirability tests set out in section 3 of the Act.

Maintenance of necessary protection

25. The draft Order mirrors the existing provisions of the Environmental Protection Act 1990 which provide for safeguards in the form of approval by the Secretary of State and the Treasury in respect of the powers to employ and pay staff and to remunerate the Chairman and members of JNCC. Direct grants made by the Secretary of State to JNCC would be subject to the same Treasury approval as required by section 129(1) of the 1990 Act. We agree that any necessary protection would be maintained.

ENABLING THE SETTING UP OF A COMPANY LIMITED BY GUARANTEE

26. Defra argues that necessary protection will be provided by the proposed sub-paragraphs of paragraph 7 of Schedule 7 to the 1990 Act, inserted by Article 4(3)(c) of the draft Order, making the setting up of a company limited by guarantee subject to the approval of the Secretary of State and Treasury and stipulating that members of the company limited by guarantee must be members of JNCC and that directors must either be members of JNCC or staff employed either directly by JNCC or on its behalf by the company limited by guarantee.[22]

27. According to Defra, these requirements will ensure that the company operates within the framework provided for by the 1990 Act and that control is vested in JNCC, with due regard for the make-up of interests represented on JNCC itself. The approval regime could, for example, be used to ensure any company limited by guarantee is constituted in such a way as to prevent it being wound up without the prior approval of the Secretary of State.

28. Defra has been in discussion with the Treasury to clarify how suitable indemnities could be given to JNCC members who participate in any company limited by guarantee against any liabilities, provided they have acted honestly and in good faith.[23] Defra expected that it would lay a Minute before the House stating that the Government would indemnify JNCC Committee members against liabilities incurred where they acted honestly and in good faith both as Committee members and through any role in a Company Limited by Guarantee. These indemnities would be analogous to those provided for other non-departmental public body members and in line with paragraph 8.3.18 of Government Accounting.[24] We agree that any necessary protection would be maintained.

Expectation as to the exercise of rights and freedoms

29. The draft Order includes a safeguard in Article 5 for the continuity of employment for employees who transfer to employment by JNCC or by a company limited by guarantee formed by it. This is a statutory provision giving staff continuity of employment. The Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) provisions would not apply to staff who transfer. Without the safeguard in Article 5, staff would be treated as having resigned from (or been dismissed by) their present employer and as having started afresh with the new employer. The new employer could agree to give them benefits equivalent to those they currently enjoy but could not treat the employment as though it had started from the day they joined their present employer. For example, staff would lose protection, for the first 12 months, against unfair dismissal.

30. The provision would not prevent staff from remaining in the employment of their current employers by transferring into suitable jobs available within the country bodies. Where staff transfer to JNCC from one of the country bodies after the coming into force of the Order and subsequently elect to return to their former employer, the latter transfer would not be covered by the provision in Article 5 and would break the continuity of employment. According to Defra —

"The Government understands that the country bodies and JNCC have publicly committed themselves to following the Government guidance on applying the principles of TUPE to public sector transfers. This will protect staff transferring to JNCC from suffering any detriment in their terms and conditions overall."[25]

31. In order to get this "understanding" on the record, the Committee requested a copy of the current Government guidance on applying the principles of TUPE to public sector transfers.[26] The Committee also asked for an authoritative statement committing the Government and JNCC to following the Government guidance on applying the principles of TUPE to public sector transfers, in respect of staff transferring to JNCC. In its reply, Defra stated—

"The country bodies and JNCC are committed to applying the Government guidance on applying the principles of TUPE in respect of staff transferring to the JNCC. Government fully endorses and strongly supports that commitment. The only public statement made to date is that within the Explanatory Memorandum which is, of course, a public document. The JNCC offer of employment to staff currently working at JNCC (see also the answer [A6] below) will reflect the principles of TUPE. We and JNCC are happy to be guided by the Committee on this matter if it is felt that some additional form of statement would be helpful."[27]

32. We are satisfied that the Government has now fully endorsed and strongly supported the commitment of the country bodies and JNCC to applying the Government guidance on applying the principles of TUPE in respect of staff transferring to JNCC.

33. Defra does not consider that any of the proposals prevent any person from continuing to exercise any right or freedom that they might reasonably expect to enjoy. We agree that the Proposal would not prevent any person from continuing to exercise any reasonable right or freedom.

Estimates of costs, savings and other benefits

34. Defra concludes that overall, the additional costs associated with implementing the Proposal are modest, and are proportionate to the size and structure of the organisation.[28] The costs, for JNCC, of putting these new arrangements in place are estimated to be in the order of £225,000 in total for the period 2003/04 to 2004/05, assuming an implementation date of April 2005. From 2005/06 to 2007/08 the costs are estimated to be £780,000 in total mainly comprising increased salary costs following pay harmonisation, and the cost of corporate systems and tasks necessary to support JNCC's human resources and finance functions and to meet good corporate governance practice. These are expected to settle after 2008/09 to £220,000 per annum.[29]

35. Set against these costs, there would according to Defra be savings of approximately £46,000 per annum, primarily in staff time, for the country bodies from 2005 onwards as some of the services that they currently provide for JNCC were transferred to JNCC's support unit.[30] Defra expects that there would be longer term efficiency savings in staff time for JNCC arising from the reduced complexity and streamlined accountability arrangements, once the new administrative arrangements had bedded in.

36. Defra reports dissatisfaction among current JNCC staff who find themselves working side by side, doing similar work, but being paid on differing terms and conditions.[31] Defra argues that changes proposed in the draft Order would help JNCC to avert the risk of a successful (and therefore costly) challenge in an industrial tribunal to the existing staff arrangements.[32]

37. In terms of other benefits, Defra places the Proposal in the context of a wider package of measures aimed to improve the efficiency, effectiveness and service delivery of JNCC as set out in the Government Response to the Financial, Management and Policy Review of JNCC.[33] Some improvements have already been made through administrative change; others await primary legislation. Defra expects that the benefits from JNCC employing its own staff will be —

removal of substantial pay anomaly
improvement in staff satisfaction
improved retention of existing expertise
reduction of staff turnover
support for the efficient delivery of JNCC's business
increased staff productivity
lower risk of equal treatment claims.[34]

38. In response to a question from the Committee on the effect of the draft Order on secondments, Defra replied that JNCC's 111 staff were assigned indefinitely to JNCC from the three country bodies, rather than seconded for a fixed period.[35] As JNCC would be party to the Common Trawling Agreement, the amount of exchange between JNCC and the country bodies was not expected to fall and indeed Defra considered that it could rise if there were an improvement in morale as a result of the proposed changes.[36] Staff would be invited to opt to 'transfer' to JNCC or 'remain' with their employing body, subject to the Order being made, in November and December 2004. Defra told us that JNCC was, however, confident that the overwhelming majority of staff currently assigned to JNCC would opt to 'transfer' to JNCC.[37]

39. Defra says that enabling the Government to pay directly for the relatively small amount of work which JNCC undertakes on UK-wide matters would avoid the present unnecessary 'double handling'.[38] Defra argues that the RRO change is needed to allow a direct funding stream to be created for the relatively small proportion of JNCC's overall workload comprising services to the UK Government beyond the country bodies' specific individual or collective responsibilities: for example, advice on licences under the Convention on International Trade in Endangered Species (CITES).

40. Defra supplied a full Regulatory Impact Assessment.[39] We consider that the Proposal has been the subject of, and takes appropriate account of, estimates of increases or reductions in costs or other benefits which may result from its implementation.

Consultation

41. The consultation document was published on 11 December 2003 on the Defra and Cabinet Office websites and sent directly to the persons and organisations either known or thought likely to have an interest in the proposals. The closing date for the consultation was 4 March 2004 (a period of 12 weeks) but account was taken of all 20 representations received, including one received after the closing date.

42. Most of the respondents were in agreement with the purpose and form of the Proposal and considered it could appropriately be given legislative effect by means of a Regulatory Reform Order. Annex C to Defra's Statement briefly records the Department's reasoned response to suggestions for changes to the Proposal; no changes were made in the light of the consultation.[40]

43. The eight proposals listed in the consultation document[41] are presented as ten items in Defra's Statement.[42] The seventh proposal in the consultation document is split into the seventh and eighth item in the Statement, with a tenth item added specifically to refer to the option of setting up a company limited by guarantee as a corporate vehicle for the employment of staff and to provide other administrative and corporate support services for the purposes of the functions discharged through JNCC. The option of setting up a company limited by guarantee was, however, mentioned in the consultation document.[43]

COMPANY LIMITED BY GUARANTEE

44. In its response to the representations received as a result of the consultation,[44] Defra recognises that it would be important to establish the correct relationship between JNCC and the company limited by guarantee.[45] Defra recognised the concerns raised in representations received as a result of the consultation about the effect on staff in the event of the company limited by guarantee winding up.[46] In response to a question from the Committee, Defra stated[47] that it had held preliminary discussions with the devolved administrations about the conditions which the Secretary of State might wish to impose when considering an application to set up a company limited by guarantee. Defra told us that, without prejudice to any application which might be received once the Order was in force, it would expect to impose a condition which would require the Secretary of State's prior approval before any such company was wound up. The purpose of such a condition would be to provide additional assurances for staff who might be employed by JNCC through a company limited by guarantee. Defra also expected to impose conditions which would require further approval for setting up any subsidiary to the company limited by guarantee and for changes to its objectives and purpose as set out in its Memorandum and Articles of Association. Defra was also looking at conditions which would specify minimum numbers of members and directors for the company limited by guarantee in order to ensure the members and directors were broadly representative of JNCC. Defra hoped that all JNCC members would wish to become members of the company limited by guarantee and Defra would encourage them to do so.[48]

COMMON TRAWLING AGREEMENT

45. In its response to the representations received as a result of the consultation, Defra recognised the concerns raised about the operation of provisions for continuity of employment when transferring between the country agencies in the Common Trawling Agreement.[49] The Committee asked Defra what assurance it could give about the operation of the Common Trawling Agreement once the Order came into force. Defra replied that the proposed Common Trawling Agreement[50] was a concordat which the three country bodies and JNCC had negotiated which would give employees of any of those four agencies common access to vacancies arising in the other three. Defra told us that both it and the devolved administrations fully supported this initiative and that they had asked that the Agreement should be finalised before the Order comes into force. The Agreement would help JNCC and the country bodies to retain valuable expertise and to offer staff better career development opportunities. [51]

46. In the light of Defra's responses above on the Company Limited by Guarantee and the Common Trawling Agreement, we consider that the Proposal has been the subject of, and taken appropriate account of, adequate consultation.

Drafting

47. The draft Order is written in reasonably plain English and Defra has helpfully supplied a document showing how the relevant parts of the 1990 Act would appear after the Order was made. Defra undertook to rectify a minor slip in paragraph (d) of the preamble, which refers to the "Deregulation and Regulatory Reform Committee." In relation to Article 5 of the draft Order, Defra explained that the phrase "an employee of one of the Councils for the purposes of section 128(4) of the 1990 Act" included employees of Scottish Natural Heritage as well as the Countryside Council for Wales and English Nature and that footnote (a) in the draft Order was intended to make this clear.[52] We invite Defra to consider whether a re-drafting of Article 5 (1) of the draft Order might possibly make the point clearer. Defra agreed to make two other drafting changes arising out of points raised by the Committee:

Defra agreed to include the words "(within the meaning of section 133 of this Act)" in the proposed new paragraph 7(5)(a) of Schedule 7 of the 1990 Act to make clear that the "special functions" to be carried out by JNCC as referred to in that paragraph were to be the same as the special functions set out in section 133 of the 1990 Act (see paragraph 1 of this Report);[53]
Defra agreed to amend the draft Order to include a definition of "the 1990 Act", i.e. the Environmental Protection Act 1990.[54]

Compatibility with obligations arising from membership of the European Union

48. Defra told us that the Government did not consider that there were obligations arising from membership of the European Union that are relevant to this Proposal.[55]

49. The Government considers that the provisions of the draft Order are compatible with the European Convention on Human Rights.[56]

Other criteria - charge on the public revenues, retrospective effect and subordinate provisions

50. The Proposal for the draft Order does not include any provision for a charge on the public revenues. It does not purport to have retrospective effect and nor does it designate any provisions as subordinate provisions.

11 Consultation paper para 5.13 and Statement para 8. The Government announced on 23 November 2004 that it intends to publish a draft Modernising Rural Delivery Bill for pre-legislative scrutiny. The draft Bill is expected to establish a new Integrated Agency to integrate and build on the work done by English Nature, the Countryside Agency and the Rural Development Service, to remove organisational barriers and to streamline administration and legislation. Back

12 Statement para 39 Back

13 See para 230 of the Eleventh Report from the Regulatory Reform Committee of Session 2003-04, Proposal for the Regulatory Reform (Fire Safety) Order 2004, HC 684. The Proposal for the Regulatory Reform (Fire Safety) Order was introduced while the Fire and Rescue Services Bill was completing its passage through Parliament, and elements of the proposal originally consulted upon were enacted by means of that Bill rather than by means of the proposed Regulatory Reform Order. Two other instances referred to by the Committee were the proposals for the Regulatory Reform (Patents) Order 2004 and the Regulatory Reform (National Health Service Charitable Trust Accounts and Audit) Order 2004, which had links to the Patents Bill [Lords] and the Public Audit (Wales) Bill [Lords] respectively. Back

14 Statement para 10 Back

15 Statement para 12 Back

16 Statement para 13 Back

17 Statement para 14 Back