House of Commons - Regulatory Reform

Select Committee on Regulatory Reform First Special Report

1 Introduction

1. The Legislative and Regulatory Reform Act 2006 received its Royal Assent on 8 November. Its provisions, which come into force on 8 January, will establish new procedures for scrutinising draft Regulatory Reform Orders (RROs) and may lead to different forms of draft Orders being laid compared with those laid under the Regulatory Reform Act (RRA) 2001.

2. To date, 29 RROs have been made under the RRA 2001. These have been scrutinised by us and our predecessor Committee on behalf of the House in accordance with our Order of Reference (currently Standing Order No. 141) and Standing Order No. 18, which governs the consideration of draft Orders by the House.

3. This Special Report sets out what we believe are the changes required to our Standing Orders in the wake of the new Act. The Cabinet Office has produced a draft of the revised Standing Orders (No. 18 and 141).[1] While we welcome much of this draft, we recommend that it be amended in a number of important respects. For convenience, we set out our recommended amendments in annex one, but in order to put these changes into context, we briefly set out the background to the Legislative and Regulatory Reform Act and our explanations for recommending amendments to the draft Standing Orders issued by the Cabinet Office.

Background

4. On 20 July 2005, the Government published its review of the Regulatory Reform Act 2001 and its consultation document on possible changes entitled A Bill for Better Regulation.[2] The Legislative and Regulatory Reform Bill was presented to Parliament on 11 January 2006. Part 1 of the Bill, which attracted most attention, was promoted as providing a much needed and effective way of removing red tape and bureaucracy. This declared aim of tackling unnecessary controls was widely supported. In reality, however, Part 1 of the Bill would have done much more than this. It was a major law reform measure that proposed, amongst other things, to give Ministers the potential power to amend or repeal virtually any legislation by means of an Order, including providing a streamlined procedure for implementing Law Commission proposals. Although the Bill included certain safeguards, such as various statutory conditions to be satisfied (in the opinion of the Minister), it was clear that the Bill as initially presented would provide Ministers with an extraordinarily wide power, including power to reform the common law by Order.

5. Before the Bill was presented, we requested that it be subject to pre-legislative scrutiny or failing that that there be a sufficient delay between the Bill's first and second readings to allow us reasonable time to conduct a full examination of the Bill and to report our views to the House before second reading. Unfortunately, the Cabinet Office rejected our requests and on presentation of the Bill we were given very little time to undertake a detailed scrutiny of the Bill before the Bill's second reading debate. Notwithstanding the tight deadline, and in view of the level of our concern, we agreed our special report on the Bill within just 20 days of the Bill being presented and published it on 6 February, three days before the Bill's second reading.[3] Our overall view, and one that subsequently became widely shared, was that despite being promoted simply as a means to remove unnecessary regulation, the Bill had the potential to be the most constitutionally significant Bill to be brought before Parliament for some years. While we supported the declared aims of Part 1 of the Bill, we expressed our concerns over the disproportionate scope of the Ministerial powers being proposed and called for the Bill to be rebalanced in favour of more effective Parliamentary scrutiny. We invited the House to consider further safeguards within the Bill as a way of limiting the scope of the proposed powers. Our special report, which we believe, was comprehensive, critical and constructive, included the following main features:

a critique of the Cabinet Office's preparation leading up to the Bill being presented, specifically the quality of the (delayed) review into the 2001 Act and the way in which the consultation was handled and summarised;
original research refuting the Cabinet Office's allegation that streamlining of Parliamentary scrutiny procedures was necessary in order to increase the pace of regulatory reform Orders being made;
detailed analysis of the Bill's provisions to streamline Parliamentary procedure;
detailed options for reducing the scope of the Bill to a level proportionate with its declared aims and rebalancing the Bill in favour of effective Parliamentary scrutiny, including suggesting further safeguards, such as providing a Committee veto against the use of the Order-making power for inappropriate purposes, off-limit areas of key legislation (i.e. areas where the new powers could not be used to effect amendments or repeals) and longer time periods for the Committee to scrutinise draft Orders; and
recommendations for changing our Standing Orders, including granting the power to trigger debates without having to divide.

6. During March and April, three other Committees in the Commons (Procedure, Joint Committee on Human Rights and the Public Administration Select Committee) produced critical reports. The various reports revealed a broad degree of consensus in favour of rebalancing the Bill in the general direction recommended in our report. There was support for off-limit areas being specified on the face of the Bill, such as the Human Rights Act and Part 1 of the Bill itself and some support for a Committee veto to be put on the face of the Bill so that further proceedings on a draft Order could be halted if we (or our sister Committee in the Lords) consider a draft Order to be inappropriate for delegated legislation. In June, two Committees from the Lords (Delegated Powers and Regulatory Reform Committee and Constitution Committee) also published reports expressing support for rebalancing the Bill.

The amended Bill

7. During the early stages in the Commons, the then Minister (Jim Murphy MP) resisted all arguments in favour of substantive amendments to the Bill. For example, no significant concessions were made during the Committee stage of the Bill, although late during Committee stage the Minister did accept the principle that the Committee charged with examining a draft Order should be given some form of statutory veto on the use of procedure.[4] On 4 May, just before the report stage in the Commons, the Government tabled 65 amendments to its Bill, including amendments to leave out two of the most significant and controversial clauses (clauses 1 and 2) and replace them by a more limited power for Ministers to make changes to legislation, and a restricted Committee veto. During proceedings in the Lords, the Government made further significant amendments by dropping all clauses relating to Law Commission proposals and adding explicit limits on the degree of sub-delegation that Orders can provide. The main changes to the initial version of the Bill were as follows:

a) the Bill's controversial wide power of "reforming legislation" was replaced with the more constrained power "to reduce or remove burdens";[5]

b) two off-limits statutes were specified on the face of the Bill so that no Order made under the Bill could make amendments to them: they were Part 1 of the Bill itself and the Human Rights Act 1998;

c) the period during which the relevant Committees could change the Minister's recommended procedure for each draft Order was increased from 21 days to 30 days;

d) a statutory veto (i.e. the power to stop further proceedings being taken in relation to any draft Order, subject only to a resolution to overrule by the House itself) was granted to the relevant Committee in each House;[6]

e) provisions relating to Law Commission recommendations were deleted;

f) explicit limits on the power to sub-delegate were added;

g) further limits on the power to change taxes were added; and

h) a further precondition that Orders cannot contain provisions that are considered by the introducing Minister to be of "constitutional significance" was added to the Bill.

8. In broad terms, the Bill was amended in the general direction that we recommended in our special report at the start of the year. While we welcome the improvements that were made to the Bill, we suspect that had it been subject to pre-legislative scrutiny, as we had requested at the time, we could be looking at an even better Act - one that would work better to the mutual benefit of Parliament and the Executive.

Changes required in the Committee's procedures and Standing Orders

9. The Legislative and Regulatory Reform Act 2006, which will come into effect on 8 January 2007, requires changes to be made to the way that draft Orders are be scrutinised by the House and specifically by our Committee.[7] For example, under the new legislation, draft Orders will be subjected to one of three procedures (negative, affirmative or super-affirmative) instead of the existing one (super-affirmative). The new legislation also includes some new tests and a possible Committee veto.

10. At present, the handling of Regulatory Reform Orders is governed by our Order of Reference (currently Standing Order No. 141) and the Standing Order (No 18) relating to the consideration of draft Orders by the House. These Standing Orders now need to be significantly amended to reflect the changes brought about by the new legislation. It would be desirable for the House to approve the new Standing Orders in good time before any new draft Orders are laid, which is not expected to be before March. The task of approving our new Standing Orders within the deadline has been made easier by Pat McFadden MP (Cabinet Office Minister) issuing draft Standing Orders. We and the Procedure Committee have been invited to comment on them.[8]

11. From the outset, we should say that we welcome certain aspects of the Minister's draft. For example, we welcome the wider remit that our Committee has been given that will allow us to conduct inquiries into "regulatory reform" generally (Standing Order 141(1)). This expanded role is in line with our recommendation in our special report.[9]

12. However, we are concerned that another major recommendation made in our special report relating to our Standing Orders has not been incorporated into the draft Standing Orders, namely: our wish to have the power to refer certain draft Orders for debate. We discuss this omission below.

13. Annex 1 sets out our suggested deletions and additions to the Minister's draft version of the Standing Orders covering the consideration of draft Orders (currently Standing Order No. 18) and our Order of Reference (currently Standing Order No. 141). For convenience, we also set out below a brief explanation of the major amendments in the following paragraphs.

TO FACILITATE DEBATES

14. Under the current Standing Orders, a debate on a draft Order is required only if the Government tables a motion to approve a draft Order on which we have previously recommended that no further proceedings be taken, or where we have approved a draft Order following a division.[10] A Government motion to approve a draft Order would be debated on the Floor of the House for a maximum of three hours in the former case and a one and half hour debate in the latter. To date no such debate has been required on any of the 29 RRO approved.

15. A debate on the adjournment in Westminster Hall on fire safety was organised by the Government in response to a recommendation by the previous Committee following its consideration of the Fire Safety RRO proposal. That draft Order was approved by our predecessor without a division.[11] During the debate, which lasted some three and half hours, Members gave a general welcome to the opportunity to debate the Government's proposed Order. That debate clearly provided a valuable additional means by which the wider views in the House could be gauged and used to supplement our own technical scrutiny of the Order.

16. In our special report on the Bill, we recommended that we be given the power to secure a debate on a particular Order, without the requirement to divide. We strongly believe that we should be able to secure a debate on any particular draft Order which we consider to be of sufficient legal or political importance as to warrant one. We are mindful of occasions when Members expect to have an opportunity to comment on an Order, even if we consider the Order to be appropriate for delegated legislation. Furthermore, we consider that it would be illogical and inconsistent for draft Regulatory Reform Orders that might be making significant amendments to primary legislation not to be debated at all, unless we issue an adverse report or are unable to approve a draft Order unanimously, whereas normal statutory instruments subject to the affirmative procedure would be debated routinely. The absence of a power to secure a debate is especially worrying, since future draft Orders may be more controversial than those generally laid under the 2001 Act. As we said in our special report, a particular strength of the RRO process compared with the Bill procedure is that individual articles of an Order can be subject to very detailed analytical scrutiny. However, we are also mindful that, when compared with the normal Bill procedure, the RRO process suffers a particular weakness, namely the lack of opportunities for other Members of the House to debate Orders that amend primary legislation that can potentially affect their own constituents. We believe that the RRO process would be enhanced if where we considered Orders to be of sufficient legal or political importance to warrant a debate, such a debate could be secured without a requirement that we divide on the draft Order. We therefore consider that the Minister's draft Standing Orders should be amended to allow us to refer those draft Orders that we consider to be of sufficient legal or political importance to a Delegated Legislation Committee. This, we understand, can be achieved by treating such a recommendation in our reports as an automatic referral to a Delegated Legislation Committee. This power would be similar in kind to that which is currently exercised by the European Scrutiny Committee (ESC). We recognise that there are differences between the work of ESC and our Committee, not least that documents it scrutinises are generated in Brussels and that the purpose of any report or debate is to give the responsible Minister a steer in relation to Council proceedings where the Council is the decisive institution. We consider that, in relation to the draft Orders that we will scrutinise, the relevant Minister has a far more significant role, which in our view makes it all the more desirable for us to be able to trigger a debate if necessary.

17. Under our current Standing Orders, if we approve a draft Order following a division, the subsequent motion made by a Minister of the Crown to approve such draft Orders is debated for up to one and a half hours on the floor of the House. The draft Standing Orders has the debate taking place in Delegated Legislation Committee. We consider this unacceptable.

18. We recognise that the Government could, if it felt strongly enough, overturn our referral of a draft Order to a Delegated Legislation Committee, but equally the Government may decide that a particular draft Order warrants a debate to be held in Westminster Hall, or even on the Floor of the House. We recommend that the draft Standing Orders be amended to provide us with the power to refer Orders for debate in Delegated Standing Committees that we consider to be of sufficient legal and political significance without having to divide or contrive a division. For draft Orders that we do not approve unanimously, we recommend that our current procedures continue and that any subsequent motion made by a Minister of the Crown to approve such draft Orders should be debated for up to one and a half hours on the floor of the House.

TO ALLOW SUBORDINATE PROVISIONS ORDERS TO BE SCRUTINISED

19. As drafted, the revised Standing Orders propose to transfer scrutiny of any Subordinate Provisions Order to the Joint Committee on Statutory Instruments (JCSI). Subordinate Provisions Orders which may be made under RROs made under the 2001 Act are similar to other statutory instruments, but are not subject to the consultation and scrutiny procedures required for the main Regulatory Reform Orders.[12] In our view, an important element of scrutiny would be lost by this transfer. Under the current procedures, we are able to scrutinise such Orders in two ways. First, we scrutinise the technical qualities of such Orders to ensure that they are in Order. This requires us to apply the same tests as those applied by the JCSI when assessing other statutory instruments: examining the technical qualities of such instruments and determining, for example, whether the Orders are defectively drafted or of doubtful vires. Second, we also reach a conclusion on whether an Order or draft Order should be annulled or not be approved (as the case may be) and report our opinion to the House.[13] This second task allows us to assess Subordinate Provisions Orders on grounds other than their narrow technical qualities and, if necessary, to express our opinion on the desirability of any Subordinate Provisions Order. JCSI is not able to express such an opinion. We believe that the House should not lose this second element of scrutiny. In his letter to us, David Maclean MP, chairman of the JCSI, reported that it was his Committee's view also that the House should not lose such a power to express an opinion on the merits and desirability of Subordinate Provisions Orders and that his Committee had no wish to see its own role expanded to include such a power.[14] We recommend that Subordinate Provisions Orders should continue to be scrutinised in the Commons by our Committee as now and the draft Standing Orders be amended accordingly.

TO AMEND THE CRITERIA

20. The draft Standing Orders (141(3)) sets out the criteria that we will use when scrutinising draft Orders and is largely based on the list of tests in our current Standing Orders. In our view, it represents a helpful sequence of considerations likely to be brought to bear on any draft Order. It should be noted that the criteria require us to form our own views as to whether any Order passes the various tests (rather than just reaching a conclusion on the rationality of the responsible Minister's views). Similarly, the wording in the introduction "the Committee shall include in its consideration in each case" makes it clear that the set of instructions is not intended to prevent us from considering other matters which might seem to us to be pertinent in any particular case.

21. While we are content with the level of detail set out in the draft Standing Orders, we have concerns about the wording of individual criteria. As the scrutinising Committee, we believe that in applying the criteria we should be concerned with the actual legislation and its effects and not with what the Minister may have intended. We therefore recommend that the wording in 141(3b and 3c) be changed from the subjective to the more objective. This amendment also has the added advantage of providing a better match with the tests set out in the Act.

TO INCREASE THE 15 DAYS LIMIT FOR THE SECOND STAGE REPORT

22. The draft Standing Orders (141(7)) contains the current instruction that under the super-affirmative procedure we must produce our second stage report within 15 days of the draft Order being laid.[15] We and our predecessor Committee have always fully complied with this instruction. However, given that under the new legislation the number of draft Orders is expected to increase and may also include more controversial draft Orders, we suspect that while we should be able to report within 15 days in most cases, we may occasionally find it difficult to comply fully with this instruction while also maintaining effective scrutiny of each draft Order. We believe that the risk of breaching the instruction to report within 15 days is most likely to occur if the Government decides not to follow a specific recommendation to amend a proposal made in a first stage report, or amends the draft Order in an unexpected way, especially if we need to request further evidence from departments and elsewhere before completing our scrutiny of a draft Order. In short, 15 days for a second stage report may not always allow sufficient time for us to complete our scrutiny of the Government's case. The deadline also runs the real but unnecessary risk that if we have insufficient time to undertake proper scrutiny on behalf of the House, we might feel compelled to consider applying the veto. Therefore, we envisage that we will always report within 15 days when there are no new second stage issues to consider, but for revised Orders we can only report as promptly as is reasonably possible. We recommend that the draft Standing Orders be clarified accordingly by amendment.

STANDING ORDER 141 (13) GIVING DEPARTMENTS THE OPPORTUNITY AT EVERY STAGE

23. Standing Order 141 (13) requires that we give departments an opportunity to provide oral or written evidence before reporting at, on the face of it, every stage of the scrutiny process. This instruction could prove to be very bureaucratic and could expose us to the risk of breaching some statutory time limits. For example, we may need to report before the 30 days limit (questioning the recommended procedure); between 30 and 40 days (reporting on negative and affirmative draft Orders), before 60 days (first stage of the super affirmative procedure); and (if draft 141(7) survives in its present form) within 15 days for the second stage super-affirmative procedure. The proposed requirement that at every occasion we seek oral or written evidence from departments is unnecessarily burdensome. Other Committees function perfectly well and provide their respective departments with reasonable opportunities to provide oral or written evidence without the need for such an instruction. We, like any other parliamentary Committee, will provide departments with reasonable opportunities within the limitations imposed on us by the Act and recommend that the Standing Order 141(13) be deleted.

Review of the 2006 Act

24. In agreeing the 2001 Act, the Government committed itself to conducting a review into the workings of the Act within three years of it being passed. Although we had criticisms of the way that review was conducted, we consider that it is desirable to hold timely reviews of such legislation. We therefore recommend that the working of the LRRA 2006 be reviewed within three years and that the review include a genuine validation of any costs and benefits or Regulatory Impact Assessments that are produced in support of all draft Orders; and that the Government report its findings to Parliament.

Committee resources

25. Although the new legislation may increase the number of draft Orders, it is difficult to predict how much departments will actually use the new powers and the complexity of future Orders. Given these uncertainties, it is possible that our existing limited resources will be put under strain if we are called upon to scrutinise significantly more Orders or more complex Orders within the tighter deadlines. It is imperative therefore that the House and the Department of the Clerk are able to respond speedily to any significant increase in activity. In the first instance, we would expect to be able to draw on staff in the Scrutiny Unit to be seconded in relation to specific Orders or stages of them, so as to provide assistance to the regular staff advising the Committee. However, if the work commitment associated with scrutinising draft Orders is maintained at a higher level, then we would expect the additional resources to be provided on a more permanent basis. The tasks of organising the necessary resources will be made easier if the Cabinet Office, as the body coordinating RROs, is able to provide regular updates to us on departments' future plans to legislate by RRO, over and above the information they already helpfully provide on possible laying dates of proposals.

1 See Appendix A [Pat McFadden's letter] Back

2 A Bill for Better Regulation: Consultation Document, Cabinet Office, July 2005 Back

3 See Regulatory Reform Committee's First Special Report of Session 2005-06, Legislative and Regulatory Reform Bill, HC 878 and the Government's Response, HC 1004. The Government's response to our special report was supplied to us just before the start of the Committee stage of the Bill. We arranged for the response to be made available in the Library. Back

4 The Minister subsequently reaffirmed this undertaking in a letter to our chairman on 12 April 2006. See Appendix B Back

5 Unlike the purposely restrictive legal concept of burdens in the 2001 Act, the Government's amendments proposed a wide and general definition. Back

6 This recommendation would be binding unless overturned by a resolution of the House. The Government originally tabled a limited veto, but the constraints on the use of this veto were subsequently removed by a Government amendment during the Bill's progress through the Lords. Back