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So while an order could amend or abolish the functions of an economic regulator, this would clearly be possible only where the evidence, including economic arguments and cost benefit analysis, clearly demonstrated that the removal or modification of those functions was for the purpose of removing or reducing burdens, where the important preconditions in Clause 4 were satisfied and where the order did not breach the Government’s undertaking to preserve the independence of regulators.
Lord Norton of Louth: What would the effect on confidence be while all this was going on?
Lord McKenzie of Luton: The situation would be the same as it is under the 2001 Act. I will come on to the independence of regulators and the role of Parliament. I do not think that the way in which the 2001 Act has operated has given rise to any difficulties in this regard.
In reality, any proposals that relate to economic regulators are likely to be more straightforward. I am thinking, for example, of the consultation already under way for an RRO under the 2001 Act powers—from which, of course, there is no exclusion for the economic regulators—to change the Financial Services and Markets Act 2000. That Act sets out the functions and duties of the Financial Services Authority, which, as Members of the Committee will know, operates within a highly sensitive market. The proposed RRO would provide for better-targeted FSA regulation that is more risk based, and includes proposals to remove unnecessary or disproportionate consultation burdens placed by the FSA on industry. Surely that is exactly what we should be trying to
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In this context it is worth mentioning that the safeguards described above have worked well under the 2001 Act. I understand that the mere existence of the order-making power in that Act, from which the economic regulators are not excluded, has not led to any uncertainty within the markets in which those regulators operate—nor should it. This Bill contains stringent safeguards and is more focused on the delivery of better outcomes than was the 2001 Act, so it should provide an increased level of certainty for the listed economic regulators.
The amendment is an unnecessary restriction which would mean that the listed regulators themselves—including the Office of Fair Trading, which is listed in Amendment No. 47B but not Amendment No. 47A—would not be able to propose by order amendments to their functions even where that might be beneficial to enable more efficient delivery of their objectives.
To look at one of the differences between Amendment No. 47A and Amendment No. 47B, Amendment No. 47A deals with orders that we cannot “abolish or modify”. Modifying them by adding to them would not be permitted under the amendment. Whatever else one thinks of that amendment, it is difficult to see why any regulator would want that provision in the statute. Amendment No. 47B bears close relation to Amendment No. 47A but is more specific, in that it deals with not only changes to the functions of the economic regulators but the independence from Ministers of directors and members of the regulators and how such directors and members can be removed from office. Subsection (3) in Amendment No. 47B concerns a removal from office of the director and other members of a regulator. The Committee will be aware that the chairman and members of those regulators are, in accordance with the statute setting them up, all appointed by the Secretary of State. In some cases, the statute specifies that the terms of appointment shall be determined by the Secretary of State.
The Committee may also be aware that the Secretary of State already has the statutory right to remove a chairman or other member on grounds such as misconduct or incompetence. I am therefore unclear what additional protections the amendment is intended to achieve. If it is about the Government misusing the powers in the Bill—for example, if they seek to remove a hypothetical director-general of an economic regulator as swiftly as possible—making an order under the Bill is not the way to do that, as the Committee will know. There are stringent safeguards in place and rigorous scrutiny for all orders that a Minister proposes.
The point has been made that orders must havethe consent of the economic regulators. They would be consulted and their views expressed in the Explanatory Memorandum. The Bill is about regulators operating efficiently, but also about the
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On the issue of primary and secondary legislation raised by the noble Earl, Lord Onslow, just to be clear, orders can be used to amend or repeal primary and secondary legislation. Our point is that a Minister is unlikely to use an order under the Bill only to amend secondary legislation, as departments already have power to amend or repeal such legislation. On the issue of the wishes of Ministers, I should like to understand how noble Lords can explain how imposing an obligation to comply with the wishes of the Crown could remove or reduce burdens under the clause or to promote the five regulatory principles under Clause 2. I do not see how that can happen. On independence from the wishes of the Minister, there are stringent safeguards in place to prevent an abuse of ministerial power.
Given the potential better regulation benefits for the economic regulators, the stringent safeguards in Part 1, and the fact that the 2001 Act has not led to an environment of uncertainty in the markets in which these regulators operate, I urge the noble Baroness, Lady Wilcox, to withdraw her amendment.
Baroness Wilcox: I fear that I find the Minister's answer unsatisfactory. I shall read it carefully. I tabled my amendment with the lightest touch. This debate has been extremely useful because it has confirmed to me that there is something sinister lurking behind the surface of the Bill. I tabled it as a probing amendment only; the Minister knows that.
Lord McKenzie of Luton: Can the noble Baroness tell me specifically what it is that she thinks is sinister lurking behind the Bill?
Baroness Wilcox: The present chairman of the Office of Rail Regulation wrote to the Chancellor of the Duchy of Lancaster protesting about the scope of Part 1. He has warned of exactly the same hazards of which the former Rail Regulator warned—the jeopardy to private investor confidence created by the power of a Minister to interfere with the independence or jurisdiction of the principal economic regulators. I have not heard anything from the Minister that has changed my opinion that he is likely to be able to do that again. He may say that there is no intention to do so, but words cannot bind a future Government. If that is what he is telling me that the Bill will do, I cannot see that that is the case.
Lord McKenzie of Luton: Can the noble Baroness identify any circumstances under the operation of the 2001 Act that have given rise to market uncertainty?
The Earl of Onslow: Perhaps I may help my noble friend. It is very simple. We do not trust Ministers. If you are me, you do not trust any Minister, however good, jolly, smiling and sweet they look at the
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Lord McKenzie of Luton: Does the noble Earl accept that under the Bill, it is not just the whim of a Minister that would carry these things forward; a very extensive process, which I have outlined, must be gone through? A Minister could not just, on a whim, act inappropriately.
Baroness Wilcox: I thank my noble friend Lord Norton of Louth for tabling his amendment, which is stronger than mine. We have heard today from the Liberal Democrats that even the noble Lord, Lord Goddard, seems a little more inclined towards our amendment.
Baroness Wilcox: I am so sorry, I apologise. I was getting upset and excited.
Lord Goodhart: I hope that the noble Baroness does not see me as an incarnation of the famous Lord Chief Justice.
Baroness Wilcox: I am sure that if the people who have spoken from this side—and the noble and learned Lord from the Cross Benches—in support of this amendment read the result of this debate in Hansard, that will enable us to return with a stronger amendment. However, for the moment, I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
[Amendment No. 47B not moved.]
Lord Bassam of Brighton moved AmendmentNo. 48:
Page 4, line 4, leave out “, 2(1) or 3(1)” and insert “or 2(1), other than provision which merely restates an enactment,”
On Question, amendment agreed to.
[Amendments Nos. 49 and 50 not moved.]
Lord Goodhart moved Amendment No. 51:
“( ) the provision has no adverse effect on the rule of law or the independence of the judiciary”The noble Lord said: This group of amendments contains a number of alternatives, all with the same objective: to ring-fence certain matters—broadly speaking, those of constitutional importance—so that they cannot be altered by order under this part. The Government have accepted that that procedure should not be used to introduce controversial changes
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7 pm
I believe it is possible and desirable to give some guidance in the statute on what are constitutional matters. Amendment No. 51 starts by specifically ruling out provisions that have an adverse effect on the rule of law or on the independence of the judiciary. Everyone in the Committee must agree that these are central pillars of the constitution. This procedure should therefore plainly not be used if that provision would have an adverse effect on the rule of law or the independence of the judiciary, even very slightly.
I shall move on to the wider aspects of the constitution. The amendments in my name and that of my noble friend Lord Maclennan of Rogart offer three different ways of identifying whether an order gives rise to issues of constitutional importance. The first is Amendment No. 51, which would simply make it one of the necessary conditions in Clause 4 that the provision is not of constitutional importance. It would then be a matter for the courts on judicial review to decide whether that condition was satisfied or that the order was ultra vires because it was of constitutional importance. That is the simplest of the possible alternatives. I recognise that it is perhaps too simple. It is not easy to identify which matters are of constitutional importance. Some are obvious, but many are in the penumbra. It would be a very difficult decision for the judge to take, and it arguably brings the judiciary into possible conflicts with Parliament that are best avoided if possible.
The second alternative is provided by Amendment No. 62, which shifts the decision on what is a matter of constitutional importance from a judge to the Speakers of each House. The Speakers will, to a considerable extent, know a great deal about the constitution because they are engaged in it day by day. I assume that they could and would take advice from leading experts on the constitution before taking a decision. A conclusion reached by the Speaker of either House that the order was of constitutional importance would then block further progress. That also has the advantage of getting rid of possible conflict with the judiciary. There might be some uncertainty in the early stages about how the Speakers would apply the test of constitutional importance, but a body of precedent would be built up over time.
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The third possible course is Amendment No. 63, which is based on a proposal discussed at paragraph 56 of the 11th report of the Select Committee on the Constitution in this Session. That report set out a list of matters of constitutional importance that should not be changed by order under the Bill. I have adopted that list and slightly redrafted it. It starts with the powers of, and succession to, the Crown, which is obviously of the highest constitutional importance. I shall not read the rest of the paragraphs. All these matters are sufficiently important to justify inclusion in the list. There may be others—indeed, I would welcome suggestions of any proposed additions.
Amendment No. 64, tabled by the noble Lord, Lord Norton of Louth, would operate on the same principle underlying Amendment No. 63. It is more concise, which is an advantage, than AmendmentNo. 63, which is less complete, which is a disadvantage.
The remaining amendments—Amendments Nos. 75 and 75A, which are not in my name and that of my noble friend—use a different system for the same purpose. I shall deal with them briefly now. That purpose is to provide a list of statutes that cannot be altered by the order, rather than a list of issues. It is much better than nothing, but it suffers from the defects pointed out in paragraph 55 of the Select Committee’s report, to which I have already referred. It means, among other problems, that the list would have to be updated every time a new statute of possible constitutional importance was introduced, which might lead to unnecessary arguments about whether the statute should be listed. In many cases—this is an important distinction—statutes contain provisions of constitutional importance alongside provisions that are plainly not of constitutional importance. I have in mind the Constitutional Reform Act 2005, perhaps particularly because I was engaged on it for many months. The Act contains central provisions on the appointment of the judiciary by a judicial appointments commission and on the composition and functions of the Supreme Court, which are plainly of five-star constitutional importance. But there are other provisions in the Bill, such as those relating to the role of the judicial ombudsman, which are much less important and may not be of constitutional importance.
I hope there will be a debate on the various alternatives, and I would certainly listen to that debate with interest before I decided which of these various suggested alternatives I might bring back on Report. I beg to move.
Lord Norton of Louth: My Amendment No. 64 is included in the group, as the noble Lord, Lord Goodhart, has already said. My proposed new clause is my contribution to the attempt to ensure that the Bill is as narrowly drawn as possible and cannot be used to infringe on the basic arrangements of our constitution. Ministers have reiterated that that is
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The attempt to put the basic tenets of the constitution beyond the reach of the Bill may be done by reference to specific measures of constitutional law, generically through reference to the basic framework of our constitution, or through both. The two approaches are not mutually exclusive, which is an important point to stress. In his response to the Constitution Committee and to what my noble friend Lord Kingsland said on Second Reading, the noble Lord, Lord Bassam, argues in his letter of 27 June that the Bill is designed to achieve better regulation and that the amendments made in the other place put it beyond doubt that the Bill could not be used for any other purpose. He argues, therefore, that it could not be used, as he puts it, “for inappropriate constitutional change”. The problem with this argument is that he assumes that better regulation and constitutional change are mutually exclusive. That they are not may even be inferred from his use of language when he refers to “inappropriate” constitutional change, which implies that appropriate constitutional change may be permissible.
The Minister’s contention that constitutional change is already beyond the provisions of the Bill is not sustainable. If the Bill is to be confined to reducing regulatory burdens that are not contentious, it needs to be as tightly drawn as possible, with the provisions of the constitution put clearly beyond its reach. As I have said, this may be done using a specific or a generic approach, as the noble Lord, Lord Kingsland—I am sorry; I mean the noble Lord, Lord Goodhart, who is in danger of being confused with rather a lot of other noble Lords or former noble Lords—has said.
The Constitution Committee offered a list of measures that might be excluded. As it recognised, that may not be an entirely straightforward exercise. The noble Lord, Lord Bassam, picked up on this in his letter in arguing against such an approach. However, his arguments are not persuasive. He draws on the Constitution Committee in saying that there may be difficulties in identifying which Acts are constitutional and which are not, and that there may be provisions in Acts of constitutional importance that are not in essence constitutional. My response would be to note that one can have a list of measures clearly recognised as constitutional, as demonstrated by the Constitution Committee in paragraph 53 of its report and as embodied in Amendment No. 75A, and that any gaps in coverage may be dealt with by utilising the generic approach. As I have said, the two are complementary. Doubtless there will be provisions of the Acts adumbrated in Amendment No. 75A that are not of constitutional importance, but one has only to look at the statutes listed to realise that relatively few of them are likely to contain provisions that need to be amended for the purpose of better regulation. The noble Lord, Lord Goodhart, indicated some that may, but I see no reason why the Acts listed should not in their totality be excluded from the provisions of this measure.
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As the noble Lord has already indicated, my new clause is not dissimilar in aim to Amendment No. 62, but seeks to achieve it through a somewhat different route. Under Amendment No. 62 it would be for the Speaker of either House to determine whether a proposed order covered a matter of constitutional importance; under my amendment the courts would have to make such a determination by reference to a broad definition of the constitution. As is the case for Amendment No. 62, my amendment could be agreed in addition to rather than instead of Amendment No. 63. It draws on and modifies some existing definitions of a constitution and seeks to provide an overarching one. However, as the noble Lord, Lord Goodhart, indicated, it could be argued that it does so at the expense of precision. That does not matter unduly because if the Bill is designed to remove burdens that are not overly contentious in the furtherance of better regulation, no orders are ever likely to come close to being challenged for infringing the terms of the proposed new clause, so I argue that the Government have nothing to lose by accepting the amendment. Incorporating this provision will ensure that the measure cannot be abused by future Governments.
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