House of Commons - Regulatory Reform

Select Committee on Regulatory Reform First Special Report

3 The Government's suggested changes for encouraging use of the RRA

16. In correspondence and oral evidence to us the Government has outlined a number of suggestions for improving the working of the Regulatory Reform Act. These suggestions, which were not based on a formal review of the working of the Act, arose during informal contacts between the Cabinet Office and Departments. The suggestions seek to remove perceived obstacles to the successful working of the Act. The Government divided its suggestions into those related to improving the administrative handling of RROs and more substantive points related to the working of the Act.[29] For example, in the former category, the Minister questioned the need to provide presentations to us on each proposal, the length of the consultation documents and the "requirement" to publish RIAs. As regards the substantive issues, these included the two-year rule, the lack of an express power to sub-delegate, the concepts of "burden" and "activity" as used in the RRA and the time scale for scrutinising proposals during the first stage. Overall, the Government seemed to be raising the possibility of encouraging greater use of RROs by easing some of the constraints on the power to make RROs and streamlining RRO documentation. The underlying assumption throughout seemed to be that by widening the scope of RRA and easing the burden on Departments by making the process of preparing and explaining an RRO proposal less onerous, RROs would become a more attractive legislative option for Departments. According to the Minister, if the barriers could be eased, then it was more likely that "big bold" legislation similar to the proposals for fire safety and civil registration would be enacted using the RRO process.[30] She said that although no decisions had been taken at this stage about how the RRA could or should be amended, there was clearly a willingness within Government to act if it was considered that amendment of the RRA could make it possible to achieve greater regulatory reform.[31]

17. The Government invited our comments on these suggestions. We set out some comments below, but from the outset we should emphasise that we consider that it would be premature to undertake any major changes to the RRO process without a detailed analysis being undertaken in the form of the Government's promised formal review. We hope that our preliminary comments will help the Government when drawing up the scope of its review.

Suggested changes to the power to make RROs

18. Below we set out our preliminary comments on some of the issues that were raised by the Cabinet Office, some of which have high constitutional significance.

Power to sub-delegate

19. Although the RRA provides Ministers with a wide power to reform primary legislation, this power is subject to certain limits. One of the limits is that the RRA does not allow an RRO to confer power on Ministers to make further subordinate legislation (a power to sub-delegate). The Minister told us that the lack of such a power was

probably one of the most significant barriers to the whole use of the RRO procedure at the moment and prevents large-scale proposals being brought forward to a significant degree. Most large-scale proposals, or a lot of them, need within them a power to sub-delegate.[32]

20. The Minister did not provide a specific number of cases where this had been a problem, but gave two examples: proposals found in the Law Commission's draft Housing Bill which would have reformed the law on residential tenancies and some proposals from the Department for the Environment, Food and Rural Affairs on inshore fisheries. According to the Minister, reforms in these areas could not be delivered by RRO because of the lack of such an express power to sub-delegate. She said that the need for sub-delegation arose from the large size of the Bills concerned rather than any particularly controversial aspects of them and the lack of a power to sub-delegate made it difficult for large proposals to go though the RROs procedure.[33]

21. The introduction of a power to sub-delegate within the RRO process would widen significantly the scope for Ministers to amend primary legislation. In our view, such a change would go beyond the mere tidying up of some minor or inconvenient aspects of the present power and would amount to a constitutionally significant extension of the RRO process. It could allow Ministers to make less specific provision in a RRO itself, leaving a substantial proportion of the law being reformed to be made subsequently by ordinary statutory instrument, which inevitably receives less searching scrutiny than we apply to an RRO. This is a tendency that is widely evident in primary legislation nowadays. The Minister acknowledged that it would be a novel idea to include such a power in the RRO process and that, if it were introduced, there may be a need for additional safeguards such as a requirement for subordinate legislation made under it to be subject to the affirmative resolution procedure. We consider that any proposal to introduce a power to sub-delegate would require very careful consideration by the House and would require significant safeguards for the exercise of the power.[34]

Two year rule

22. Section 1(4) of the RRA provides that an RRO may not be made to reform any Act of Parliament which is less than two years old or any provision of an Act of Parliament if the provision has been substantively amended within the previous two years by an Act or by a Statutory Instrument. This rule was incorporated into the legislation to discourage over-frequent legislative amendments. The Minister told us that the second part of the rule had caused some difficulties with a number of proposals. A substantial part of the proposed Gaming Machines RRO for example, had had to be dropped shortly before scrutiny on the grounds that a previous prize up-rating order had amended the same provision. Part of the NHS Charities RRO proposals was also dropped when it was realised that one of the main provisions had been amended by a Treasury Order made in October 2003. The Minister told us that a huge amount of work that may have gone into preparing an RRO may be wasted, or put on hold for another two years, simply because another Department had laid a statutory instrument, possibly to give effect to quite minor amendments. The Cabinet Office has provided examples where the problem has arisen.[35] We note the Minister's comments about the second part of the rule. We also note that the Government have adopted legislative devices to overcome its effects — a practice we consider serves only to complicate the law undesirably. In her letter the Minister accepted the principle behind the rule.[36] We consider that if the rule (or the second part of it) were removed an alternative way of achieving its purpose should be sought. It also seems to us that Departments need to develop procedures for checking whether there have been relevant amendments to the legislation which they propose amending, when preparing proposals for RROs.

Reference to activity

23. Under the RRA, Regulatory Reform Orders can only be used to remove, reduce or create burdens that affect persons in the carrying on of an activity.[37] According to the Government, within the context of the RRA the term activity means a "coherent, ongoing series of actions".[38] In her letter (dated 13 September 2004), the Minister stated that Departments felt that the need to identify an activity which was affected by existing burdens could prevent proposals being made. We asked the Minister how frequently this happened. She did not provide a specific number, but pointed out that the current provision precluded one-off actions and people affected by burdens in a passive capacity, such as recipients of benefits.[39] The Minister gave us the example of a proposed reform to the law relating to personal insolvency, where it was considered that insolvent persons did not perform an activity for the purposes of the RRA. The Minister added that

There does not seem to be much rationale behind the fact of having it referred to as an activity rather than defined in some other way. That is one area where I think it could be useful to clarify.[40]

24. We are inclined to agree that the need to identify an activity being carried on by those affected by a burden for it to be capable of reform under the RRA does not fulfil any useful purpose, although the requirement does not seem likely to be an impediment to use of the RRA power in the great majority of cases. For example, to date, we believe it has only proved problematic in one case - the civil registration proposal.[41] Moreover, we have also accepted reform of Carers' Allowance and Vaccine Damage Payments on the basis that the burdens on the Secretary of State also affected individuals and so did not fall foul of s.2(1) of the Act.[42]

25. Removal of this requirement would, however, have implications for the power to create new burdens. Currently the RRA permits the creation of a new burden only if it affects a person in the carrying on of the activity involved in the existing burden. If the requirement to relate to an activity were removed in relation to existing burdens, some other kind of limitation on the power to impose new burdens would be needed, if RROs were not to become a dramatically more powerful tool in creating new legislative burdens.

Removing burdens on Ministers or Government Departments

26. Section 2(1) of the RRA makes clear that the Act cannot be used to reduce burdens which fall solely on Ministers or Government Departments. In her letter of 13 September 2004, the Minister stated that this restriction may prevent the Government from using the RRA to reduce official bureaucracy and improve delivery in the public sector.[43] In oral evidence, she commented that "the removal of a burden on a Minister or a Department in itself might be a good thing, provided the costs and benefits were properly examined and the proper scrutiny took place and so forth."[44] The Minister suggested that as an additional safeguard the RRO might also have to remove a burden on some third party, so that its value, in terms of its effect on a third party, would also be very visible and transparent.[45]

27. On this point too we are inclined to agree that the restriction is not necessary. We would like to point out, however, that the safeguard referred to by the Minister is already present because the RRA only prevents the removal of burdens on Government which do not affect anyone else. In our view a power to remove or reduce burdens on Government should not have the potential to increase burdens on individuals or businesses.

De-regulatory focus of Regulatory Reform Act

28. Section 1(3) of the RRA requires every RRO to remove or reduce a burden. According to the Minister, some departments have questioned whether each RRO should have a de-regulatory element, especially in the context of a power that seeks reform and improvement in legislation.[46] The Minister said that while this restriction had in practice rarely been an obstacle to RRO proposals to date, she would welcome the views of the Committee on this issue. We have some difficulty with this suggestion. First, as noted above, the RRA can be traced to the Deregulation and Contracting-Out Act 1994 so there has been an element of de-regulation since its origins. While this does not mean necessarily that a power to reform legislation by RRO should replicate the overtly de-regulatory approach of its predecessor, a de-regulatory element might reasonably be expected to be a feature of the power. Secondly, many RROs — particularly the larger ones — are not conspicuously de-regulatory in their purpose or effect, even though they all seem to satisfy the requirement in section 1(3) without difficulty. Instead they tend to make adjustments in the way that burdens are targeted. Thirdly, the suggestion that de-regulation should play less of a part seems to sit oddly with the Prime Minister's comments to the CBI Conference in October 2004 that he wished to amend the Regulatory Reform Act in order to push de-regulation forward. In his speech, the Prime Minister said, amongst other things, that he would be scrutinising Departments' records on regulation, vetting proposals on new regulations and encouraging them to take de-regulatory initiatives.[47] He also mentioned the new Dutch approach of introducing a target for reducing administrative costs in order to bear down on paperwork burdens faced by business and the "one in, one out" rule for regulation, where new regulations have to be matched by de-regulatory measures. He also told his CBI audience that:

If this process is to be effective we will need your help in identifying the regulations that are most burdensome and are most in need of simplification. I am also prepared to amend the Regulatory Reform Act to make it easier to get rid of redundant regulation.[48]

29. The Minister told us that "the Prime Minister not only wants to see the removal of burdens but he also wants to see regulatory reform."[49] It seems that with such high level interest, the de-regulatory impetus within RROs is unlikely to be diminished. We welcome this continued interest in regulatory reform and the removal of unnecessary burdens. Indeed, we recommend that one of the core priorities for Departments should be the removal of redundant regulation in the legislation within their area of responsibility. We consider that the review into the working of the RRA should have at its heart how best Departments could be encouraged to achieve this. We also see merit in requiring Departments to publish annually the results of their efforts in this respect.

The correction of errors and omissions

30. In written evidence, the Cabinet Office acknowledged that section 1(1)(d) of the RRA currently provides powers to remove some inconsistencies and anomalies.[50] The Government considered this a narrow power aimed at removing inconsistencies between legislative provisions and dealing with minor irregularities.[51] The Minister told us that the RRA does not permit sufficient scope for the rectification of simple errors and omissions and suggested that there might be a new power to correct errors and omissions. She gave the example of Department for Constitutional Affairs (DCA) not being able to use an RRO to correct certain minor errors and omissions as part of its proposals to reform legislation relating to third party rights against insurers.[52] She told us that she saw the possible change as trying to widen slightly what is currently a very narrow interpretation in order to avoid inconsistency and anomaly.[53] The Minister said that she would welcome the views of the Committee on whether such a power to deal with errors and omissions would sit easily alongside the current provisions of the RRA. We are not persuaded that a new power is necessary, although we have not seen the case referred to by the Minister and cannot therefore judge to what extent there may be a problem. We note that under section 1(6) of the RRA, there is already a power in addition to that noted by the Cabinet Office to make incidental and supplemental provision, which should usually allow errors and omissions to be corrected. In addition, there is the increased risk that yet further powers to correct errors and omissions may encourage more poor quality legislation that needs to be changed fairly speedily.

Overall effect of suggestions

31. We questioned whether the cumulative effect of the changes canvassed by the Minister would not simply create a general power to amend the law by Ministerial order.[54] The Minister noted that the RRO process already incorporated a number of safeguards in the form of maintaining necessary protections, rights, freedoms and benefits to the public and so forth[55] and that the Government will keep the need for appropriate safeguards foremost in mind in considering any changes.

32. As noted above, we think there may be aspects of the present power to make RROs which could be reformed without detriment. Others, however, seem to us to raise important policy issues requiring careful consideration by Parliament. It will also be necessary to look at the cumulative effect of any package of changes which is brought forward to ensure that the power to reform legislation by subordinate instrument is not unacceptably wide. In section 4, we discuss the possibility of creating new processes for implementing Law Commission recommendations and making amendments to core company law by subordinate legislation.

Suggested procedural changes

Presentations and RIAs

33. As noted above, the Minister questioned the need for the length of the consultation documents and the requirement to provide us with informal presentations (which with questions, last for an average of 30 minutes) and Regulatory Impact Assessments (RIAs) for all RROs. It seems that some Departments misunderstand these aspects of the handling of RROs. There is no mandatory requirement that presentations will always be required for every RRO. In practice, we consider the case for a presentation on a case by case basis for each proposal. When deciding whether a presentation is required, we are unlikely to insist on a presentation for very straightforward and simple proposals. In any case, the request to Departments to make a short presentation on an RRO has always been seen by us as providing them with an opportunity to explain and justify the key features of their proposal. We hope that Departments will view presentations in the same light. We regularly advertise these informal presentations in the All Party Whip to offer any Member of the House an opportunity to have explained what are after all plans for changes to the statute book. As regards RIAs, the Minister told us the issue is

a question of whether the formal RIA procedure needs to be gone through, which is quite a burdensome process, when a really thorough cost benefit analysis might be just as good a way of gauging whether the reform is needed or not. This is a proposal really just for those proposals which do not impact significantly on businesses, charities or the voluntary sector.[56]

34. It seems that some Departments also misunderstand that the Act only requires a detailed analysis of costs and benefits of the proposal be made, which we take to mean the effect that a proposal may have on all areas of society. The Act does not require that such an analysis should be presented in the form of a formal RIA. The Cabinet Office guidance on this should be made clear.

Flow of work and the timescale for first stage scrutiny

35. The Government has repeated its familiar argument that, in respect of some proposals, the Regulatory Reform Act procedure is either too long or too short, depending on the complexity of the Order, or it involves an unduly rigorous degree of scrutiny. The Minister gave the example of the two line amendment to one Act contained in the Museum of London RRO with the 64 page order contained in the Fire Safety RRO proposals, which under current arrangements are each given a 60 day first stage scrutiny period.

36. The Cabinet Office still seems to want to explore the possibility of a two-tier procedure, whereby one class of proposed draft orders—so-called "straightforward" proposals—would be subject to a lesser degree of scrutiny than the other class—so-called "complex" proposals. The suggestion seems to be that "straightforward" orders should be progressed through their parliamentary stages more rapidly and less rigorously than "complex" orders and as is currently provided for by section 6(2) of the RRA (and the Committee's Standing Order). This is not a new suggestion from the Cabinet Office. In an earlier report on the working of the Act, we indicated that we felt that any significant change in the current scrutiny arrangements would be impractical, because of the problems inherent in having to decide case-by-case on the appropriate procedures to be followed in the case of any particular proposal.[57] For example, we questioned what criteria could be used to distinguish whether or not a proposal was "straightforward" or "complex"? Who would have the authority for determining whether a proposal was "straightforward" or "complex"?[58] Those questions have still not been adequately answered. Although the Cabinet Office has questioned again the length of the first stage scrutiny process, it has not provided any new evidence. As we stated previously, even the simplest and most widely supported regulatory reform proposals would require no less scrutiny than did the proposals brought forward under the old Act.[59] It is also necessary to bear in mind, that if, as the Minister suggested, larger proposals are likely to be coming through, it may be impractical for the Committee to complete and publish its findings on them in fewer than 60 days. It is perhaps worth noting that complexity is not simply determined by the length of the proposal. One distinctive advantage of the standard 60 day period is that it provides certainty to the public who may wish to provide evidence to the Committee. An alternative arrangement involving periods of varying length depending upon the apparent complexity of the proposals simply adds unnecessary complexity without any practical benefit to those who wish to submit evidence. From the public's point of view, the process should be simplified, not made more complicated. Our view, as previously expressed in our Third Special Report (2001-02), is that we have yet to see any hard evidence that a period of less than 60 days for the initial scrutiny period would be appropriate.

Cultural bias

37. The Minister acknowledged that the relatively low number of RROs may also reflect the cultural bias within the Civil Service where RROs have a lower visibility than Bills. Despite the efforts of the Cabinet Office's Regulatory Impact Unit (RIU), it seems there is still less kudos attached to delivering regulatory reform, particularly through an RRO compared with that associated with passing a Bill.[60] The Minister told us that the Government was seeking to tackle this through the reform of the Civil Service programme and through introducing the idea of looking at the way that RROs are included in the training courses of civil servants.[61] We welcome initiatives to raise the profile of RROs and improve the understanding of the RRO process across Government. We recommend that if the Government is serious about removing redundant regulation it should vigorously promote across Whitehall the value of the RRO process as an effective way of achieving this objective.

29 Ev 9-12 Back

30 Q6 Back

31 Q1 Back

32 Q9 Back

33 Ruth Kelly's evidence to the Delegated Powers and Regulatory Reform Committee, House of Lords, 1 December 2004 Q27 Back

34 Q9 Back

35 Annex 2 and Q23 Back

36 Ev 10 Back

37 Section 1(1) Back

38 Ev 11 Back