House of Commons - Regulatory Reform

Select Committee on Regulatory Reform First Special Report

4 Encouraging regulatory reform

38. In our view, it is for the Government to provide the necessary justification for making constitutionally significant changes to the RRO process. The Government's review of the working of the RRA, which was initially promised within three years of the Act, has unfortunately been delayed. When undertaken, it would seem to be the ideal platform upon which the Government could establish a detailed case for changing the RRO process. We look forward to receiving the review during the latter part of this year. We should welcome the opportunity to examine the arguments and evidence underlying any Government proposals for further reform of the RRA.

39. Meanwhile, in the absence of the opportunity for an informed debate which we expect the review to provide, we consider that it would be premature for us to comment further on the Department's suggested changes to the RRA other than to make clear that we have not seen any evidence — outside Government — of a wish that Ministers be given further discretionary powers to amend primary legislation. On the contrary, such a transfer of power from the legislature to the executive would seem to go against the shift towards greater parliamentary scrutiny. A radical jump in the opposite direction to enhance the powers of the executive would need to be fully justified with detailed evidence. As noted above, we expect the Government to accumulate the evidence justifying any proposed changes as part of its review into the RRA. That said, we make two suggestions for improving regulatory reform that we hope the Government will include as part of its review. Our suggestions relate to a new order-making power (which would allow a certain degree of sub-delegation) aimed exclusively at implementing Law Commission recommendations and amendments to core company law. We set out our thoughts on this below.

Law Commission proposals

40. Since 2001, we have considered two RROs that were derived from Law Commission proposals.[62] The most recent Annual Report from the Law Commission reported that there were 17 Law Commission proposals awaiting implementation.[63] Some of these reports cover highly controversial areas where Parliament would probably be unwilling to depart from the normal procedures applying to primary legislation.[64] Others, however, relate to more technical reforms of the law that individually may require little parliamentary time.[65] In general, the shortage of parliamentary time is often perceived as a barrier to the implementation of Law Commission reports, though this may place an undue emphasis on the actual procedures in both Houses[66] rather than on the effort required to carry out the preparatory work required in Whitehall, not only in conducting a rigorous impact assessment and taking up the valuable time of Parliamentary Counsel, but also in simply deciding whether the Government wants to do it or not.

41. The Halliday Report recommended that the Department of Constitutional Affairs should initiate a project aimed at identifying special parliamentary procedures to facilitate scrutiny of Law Commission Bills.[67] The Government is clearly aware of the potential use of the RRO procedure to implement changes based on Law Commission recommendations where the RRA applies. Nevertheless, we suggest that where Ministers have reached a united view that a non-controversial Law Commission proposal ought to proceed and the only remaining barrier is the risk of a prolonged parliamentary process, there might be a case for a fast-track through Parliament, subject to safeguards similar to those we and our Lords counterparts operate in respect of RROs. Such a power would need to be free from the constraints of section 1 of the RRA. To be an effective fast-track, a requirement would be that an order should not be allowed to alter the substance of the Law Commission's proposals, although one would probably need to be able to make technical alterations, for instance to accommodate developments in the law since the Law Commission reported. When laying the proposed order a Minister may need to certify that the order met this criterion. If the power were limited in this way, there would be little point in requiring pre-laying consultation (though the Minister might want to consult on any technical changes from the Law Commission version). Essentially, this process would allow a Law Commission Order to amend primary legislation, on a "take it or leave it" basis, provided that a committee scrutinised it for appropriateness and vires (and perhaps any other technical issues). Importantly, the committee would not be able to recommend other changes. This procedure might still require a two-stage process, but only where the relevant scrutiny committee recommended drafting changes. If the first stage draft was acceptable, then we would see little objection to it being put to the House by means of an affirmative resolution. This suggested procedure for Law Commission proposals would thus be materially different from that prescribed by the RRA and Standing Order No. 141. Provided there is widespread support for introducing such a bespoke, fast-track process for implementing Law Commission proposals by order, then we consider the case for such a new legal power deserves further exploration within the Government's review.

Special procedure for amending company law

42. In 2001 a review of company law concluded that significant parts of company law were outmoded or had become redundant and were enshrined in law that was often unnecessarily complicated and inaccessible.[68] This problem was thought to arise from a combination (on the one hand) of very rapid changes to company law, including changes derived from international commitments, and (on the other) a very slow process of amending company legislation. In July 2002, the Government published its White Paper: Modernising Company Law that, amongst other things, suggested that the technical aspects of company law should be able to be amended by secondary legislation.[69] The Trade and Industry Committee (TISC) launched an inquiry into the subject in 2002 and in its subsequent report recommended that if the Government wanted to pursue the idea of amending company law by means of secondary legislation, then "any changes in the exercise of the most significant powers be subject to the Regulatory Reform Order Procedure, which ensures both wide publication and more detailed parliamentary scrutiny than other forms of secondary legislation."[70] In May 2004, the Government issued a further consultative document, Company Law: Flexibility and Accessibility, which set out its proposals for the procedure to be used to update company law in future. That document concluded:

Although Regulatory Reform Orders are designed for a different legislative purpose, the consultation and scrutiny processes that are built into their use may provide a useful model. The Government therefore proposes to build on these processes in designing the new powers.[71]

43. In September 2004, TISC published a further report in which it re-affirmed its view that the House should consider the option of referring company law proposals to the Regulatory Reform Committee.[72] TISC noted that the Regulatory Reform Committee not only has expertise in the type of procedure envisaged for company law proposals but has already satisfactorily dealt with proposals relating to company law under the Deregulation and Contracting Out Act. TISC further recommended that the special procedure should be used only in relation to so-called core company law, that is law relating to companies as companies as opposed to law affecting companies in any of their other roles, for example as employers or taxpayers.[73] We agree that there is a strong case for the proposed new power to use a super-affirmative procedure when reforming company law, but we consider it an open question whether it is our Committee or some other parliamentary Committee that is charged with the task of scrutinising individual proposals.