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A key part of the proposed mechanism will be an external monitoring and compliance unit, whichwill help to process processing applications for authorisation, maintain a register of authorised persons, monitor compliance with the rules, monitor advertising and marketing activity, identify persons who are evading authorisation and advise the DCA on disciplinary matters and formal regulatory decisions. This will be supplied under contract by a single trading standards team operating across England and Wales, making full use of the networks already in place. The DCA retains full authority and responsibility for regulation but working with the right trading standards operation should help to ensure the early delivery of benefits to consumers.
I have already visited Birmingham and the City of London trading standards units to learn more of the work they currently do. We have just concluded an expression of interest exercise and will be inviting short-listed departments to prepare detailed proposals. I expect the unit to be operational by October.
We are also establishing a non-statutory
regulatory consultancy group made up of representatives of the
financial services and insurance industries, the legal profession,
consumer groups and the claims management sector. It will help ensure
that we continue to engage fully with all those who have an
19 July 2006 : Column 1330
The timetable for regulation we are working tois as follows. The regulatory mechanisms will be established in October 2006; applications will be invited from November 2006; the deadline for applications is February 2007; the tribunal is to be established in February 2007; and offences and remaining provisions will go live in April 2007.
In earlier debates I stressed the speed with which we have brought forward measures to regulate the claims management sector. I hope that noble Lords are reassured by that brief but, I hope, detailed résumé of the amount of work that has been going on since the Bill left your Lordships’ House; it will continue through the summer months. I hope that I have given some comfort to those who are concerned that we need to be seen to get on with it.
On Question, Motion agreed to.
6: Clause 15, page 9, line 16, leave out “section 1” and insert “sections 1, 2 and (Mesothelioma: damages)”
Baroness Ashton of Upholland: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 6.
Moved accordingly, and, on Question, Motion agreed to.
7: Page 9, line 22, at end insert-
(a) a claim which is settled before 3rd May 2006 (whether or not legal proceedings in relation to the claim have been instituted), or(b) legal proceedings which are determined before that date.- (5) Where a claim is
settled on or after that date and before the date on which this Act is
passed, a party to the settlement may apply to a relevant court to have
the settlement varied; and-
- (6) Where legal
proceedings are determined on or after that date and before the date on
which this Act is passed, a partyto the proceedings may apply
to the court to vary the determination;
and-
Baroness Ashton of Upholland: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 7.
19 July 2006 : Column 1331
Moved, That the House do agree with the Commons in their Amendment No. 7.—(Baroness Ashton of Upholland.)
[Amendments Nos. 7Ato 7C not moved.]
On Question, Motion agreed to.
8: Clause 16, page 9, line 24, at end insert-
(a) England and Wales,(b) Scotland, and(c) Northern Ireland.”Baroness Ashton of Upholland: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 8, to which I spoke with Amendment No. 1.
Moved accordingly, and, on Question, Motion agreed to.
9: Clause 17, page 9, line 27, leave out subsection (2)
Baroness Ashton of Upholland: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 9. This is the privilege amendment.
Moved accordingly, and, on Question, Motion agreed to.
10: In the Title, line 2, after “duty;”, insert “to make provision about damages for mesothelioma;”
Baroness Ashton of Upholland: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10, to which I spoke with Amendment No. 1.
Moved accordingly, and, on Question, Motion agreed to.
Legislative and Regulatory Reform Bill
6.07 pm
Lord Bassam of Brighton: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved accordingly, and, on Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (The Countess of Mar) in the Chair.]
Baroness Wilcox moved Amendment No. 47A:
- An order under
this Part may not abolish or modify the regulatory functions conferred
on, or exercisable by, any of the following-
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The noble Baroness said: This amendment deals with a significant aspect of Part 1 of the Bill—the protection of the principal economic regulators. As I hope I made abundantly clear at Second Reading, the principal economic regulators have very significant powers over the essentials of our daily life and the operation of the economy. They deal with water, energy, communications and transport. These are networks and supplies that must be maintained and operated on sound and sustainable economic and public interest criteria. It is for that reason and the overwhelming need for private investment to be maintained and encouraged in these essential industries that Parliament has made the principal economic regulators independent of political control, with clear, objective, statutory duties that do not wave in the political wind. It is also why Parliament has given them jurisdiction to establish the demands on the systems that they regulate to determine the condition, capacity and capability of the networks in question and then to set prices that customers must pay. Those two things—independence and jurisdiction—are essential if we are to ensure that private investors will have sufficient confidence in the regulatory system to provide the working and investment capital that these industries will always need on fair and affordable terms.
As I said on Second Reading, this is no idle or academic point. I referred at some length to the Government’s behaviour towards the Rail Regulator over the winding up of Railtrack. The Rail Regulator at the time has since explained that it was the rigour and timescales of the legislative process that protected his jurisdiction and independence and caused the Government to back off, with their unconstitutional threat of legislation.
The Government admitted that they could not have got the neutralising Bill through in time; they might not have got it through at all. That is why the present chairman of the Office of Rail Regulation has written to the Chancellor of the Duchy of Lancaster protesting at the scope of Part 1 of the Bill. He has warned of the very same real hazards of which the former rail regulator warned: the jeopardy to private investor confidence which is created by a power of a Minister to interfere with the independence or jurisdiction of the principal economic regulators.
The Minister may say tonight, “Of course, the principal economic regulators must be independent. The Government have always accepted that it is important and we would never touch them”. He may say that but as the Committee knows that has not been the reality of hard experience as I have shown now and at Second Reading. Even if we accept that the Government are committed to the independence of the principal economic regulators, we must protect them from any possibility of the Bill being used against them.
I have taken the wording
for this amendment from the Government’s own drafting in Part 2.
There the Government have seen fit to exclude the
economic
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Lord Norton of Louth: I wish to speak to Amendment No. 47B in the same group. When I chaired the Constitution Committee of your Lordships’ House, the committee looked at the role of the independent regulators appointed by statute. In particular, we looked at the relationship between accountability and independence. Regulators have to be independent to do their jobs and that requires Ministers giving up some freedoms to protect the decision making of regulators. At the same time, regulators have a duty to explain, to be exposed to scrutiny and to be subject to the full rigours of the possibility of legal challenge. They have to fulfil their statutory duties.
The independence of regulators, as my noble friend has already said, is crucial. It is important that independence is seen to exist. Perhaps I may quote from paragraph 121 of the committee’s report:
- “Our evidence
suggests once again the broad range of support that underpins a
regulatory framework that separates ministerial roles and
responsibilities from those of independent regulators, and that this
fact should be well communicated on a regular basis by Government.
Water UK, for example, told us that ‘For Ministers and
regulators frequently to reassert the independence of the regulator on
economic decisions is helpful; and, after all, we had a survey of
investors recently and 96 per cent of them said that they regarded the
independence of the regulator as being very important, so just a
frequent reassertion of it would be
helpful’”.
It was also clear from our evidence that, on the whole, Ministers welcomed and supported that independence. They saw that the independence of regulators is a vital ingredient in maintaining consistency, for ensuring that regulatory decisions are taken by competent authorities—which, as we noted, accords well with current and prospective developments in the European Union—and for promoting confidence about regulation among those investing in regulated industries, as well as customers on whose behalf it is carried out. It is also extremely important for promoting confidence among those bodies that are regulated.
In evidence to the committee, the Department of Trade and Industry said that,
- “the
independence of economic regulators from Government—insulating
decisions from short term political factors—is a fundamental
contributor to regulatory certainty and prerequisite for continuing to
attract private finance to regulated
sectors”.
19 July 2006 : Column 1334
6.15 pm
That brings me to the provisions of the Bill. The amendment moved by my noble friend Lady Wilcox seeks to protect the functions of the economic regulators. My amendment is designed to probe the Government about what they intend to do to protect the independence as well as the jurisdiction of the economic regulators. As my noble friend has said, some of the economic regulators have concerns that the provisions of the Bill could be used to amend the statutes creating them and the framework within which they operate. Orders could be used to constrain their jurisdiction or to limit their independence. As my noble friend Lady Wilcox said, and as she argued at Second Reading, it is not a hypothetical possibility. She mentioned the clash between the Transport Secretary and the rail regulator in 2001 which showed that in exceptional circumstances a Minister may try to limit the independence of a regulator.
Thus, there is a need to protect the independenceof the economic regulators and—picking up onmy earlier point about reassertion of that independence—to be seen to be doing so. There needs to be a change to the Bill to reassure investors as well as the regulated bodies that that independence will be protected and that it will not be subject to the possibility, at any time, of a Minister deciding to use the order-making power to get round the decision of a regulator.
My amendment is designed to cover independence as well as jurisdiction in order to prevent a Minister transferring the functions of a regulator to another agent. The regulatory powers have to stay in the hands of the independent regulator. Like my noble friend Lady Wilcox, I have no doubt that the Minister will reiterate the Government’s commitment to the independence of the economic regulators and say that there is no intention to use powers in the Bill to affect their independence. The problem, as has been variously reiterated in our debates, is that the Minister's words cannot bind a future Government. The need for an amendment is especially crucial in this case to demonstrate that the Bill cannot be used for that purpose. This Bill brings into being the sword of Damocles. It needs to be removed.
Lord Lloyd of Berwick: I support both these amendments. The economic regulators clearly fulfil a very important role in our society today, especially the five economic regulators that are identified in the amendment tabled by the noble Baroness, to which the noble Lord, Lord Norton of Louth, has added a sixth. They also have great power. If they are to do their job properly it seems to me that they must be free of all government interference. They must not be lent on to reach any particular decision in any particular case. Their independence must be plain for all to see. I suspect that is agreed on all sides of the Committee.
19 July 2006 : Column 1335
When we were considering the Constitutional Reform Act, we wrote into Clause 1 that all Ministers must uphold the independence of the judiciary. Those were the very words that we put into Clause 1. Obviously, regulators are not judges in the ordinary sense, but they fulfil a quasi-judicial role. For that reason they must not only be independent, which I am sure they are, but they must also be seen to be independent, to use that well worn cliché. That is why, of the two amendments before the Committee, I prefer that of the noble Lord, Lord Norton of Louth, because the clause heading in his amendment refers specifically to “Independence of economic regulators”. I would go rather further than the noble Lord and I would spell out in clearer language in the body of the clause itself what it is we want. We should say in simple terms that an order under Part 1 of the Bill shall neither restrict the jurisdiction nor undermine the independence of the economic regulators. That is quite simple and short. It would do the job and I would leave it at that.
The amendment of the noble Baroness does not go far enough, because it does not refer in any way to the independence of the regulators. That of the noble Lord, Lord Norton of Louth, is better, and does at least refer to independence, but I would sooner see it in the body of the clause rather than in the clause heading.
Lord Borrie: I share the view of the noble and learned Lord, Lord Lloyd of Berwick, that, of the two amendments, the amendment of the noble Lord, Lord Norton of Louth, is to be preferred. The amendment is in his name and that of my noble friend Lord Berkeley, who is unfortunately not able to be in his place today.
Several of the agencies listed in the amendments were created when former publicly owned industries were privatised. Because an element of monopoly was created, a regulator was needed to control monopoly abuse with a measure of price control. That was the case with gas, electricity, the railways and water. Of course, I entirely agree with what each of the three speakers so far has emphasised. The word “independence” is absolutely vital: independence from the industry and ministerial control, except the minimum necessary to establish one’s financial needs to the Treasury each year; but otherwise independent of the Government.
It may be that, at some stage during the lifetime of one of these agencies, competition in the industry develops to such an extent that regulation is either no longer needed—that might sound rather extreme—or, at any rate, need not be so stringent. Therefore, the regulations imposed by or upon the agency may need to be changed. Both of the amendments are somewhat extreme, in that no detail of any kind could be altered except by statute when a regulatory reform order would surely be quite useful in dealing with the detail. The speeches of the noble Baroness and the noble Lord, Lord Norton of Louth, were not attacking detail but were concerned with independence and interfering with the principles and basic functions of the agencies.
19 July 2006 : Column 1336
Ofcom is referred to. Some of us were here during the lengthy debates on the Communications Bill, which became the 2003 Act. It involved a massive merger of a number of separate agencies dealing with television and radio, the Broadcasting Standards Commission and so on. It is a huge piece of legislation and regulation. The legislation imposed rules on Ofcom. Of course, as the years have gone by, Ofcom itself has imposed regulation on those subject to its jurisdiction. It occurs to me that after two or three years, let alone 10 years or so, there may also be a need to deal with the detail of regulation in a way which does not necessarily have to involve full-scale primary legislation.
Indeed, either Ofcom or the other regulators mentioned in these amendments may be desired by the agency itself in order to perform its tasks better. To seek an order under the Act would surely be sensible. We have not yet debated the various preconditions, safeguards, consultation and so on. I will not go into that, because we will be debating it at length in due course. I ask those of your Lordships who are inclined to favour a detailed amendment like either of the amendments before us to bear in mind that there are lots of safeguards with regard to any order made under the Bill.
I favour Amendment No. 47B because it is more cautious and gentle than that of the noble Baroness. I could not help notice, having previously had a connection with the Office of Fair Trading, that it has been added in, whereas it was not in the original one. It reminds me of a point on which I can support the noble Lord. Not long ago, the Hampton report proposed that quite a fundamental part of the Office of Fair Trading’s work—consumer affairs and protection—should be hived off and handed, together with local authority trading standards matters, to a new agency called the consumer and trading standards agency.
That idea was shot down by the Treasury, much to the relief of those presently in charge of the Office of Fair Trading, who have been able to retain their consumer affairs jurisdiction. I support what the noble Lord, Lord Norton, was saying on this matter. If something substantial was proposed in terms of the remit given by statute to any of these agencies, then it ought not to be attempted by way of a regulatory reform order but by something else.
I hope that the Minister will say a word or two about another part of the amendment of the noble Lord, Lord Norton, dealing with freedom and independence from having the “wishes” of the Minister imposed on a regulator. Do the Government feel that that has any effect on something quite common in legislation, that agencies should be subject to a ministerial direction—the technical term—in certain circumstances? The noble Lord is probably trying to get at ministerial directions which inhibit the independence of these agencies. I feel a measure of support for him on that.
Lord Jenkin of Roding: My words shall follow closely and appropriately from what the noble Lord, Lord Borrie, has said. He singled out the word “wishes”. I give a case in point.
19 July 2006 : Column 1337
What is popularly known as Ofgem is rightly referred to here as the Office of Gas and Electricity Markets. When electricity prices went down to the point where a number of generators were going bust—including, of course, British Energy—I raised with the then chairman of Ofgem, Callum—laterSir Callum—McCarthy whether he was paying enough attention to an amendment in the Utilities Act 2000, which I proposed in this House and was carried with a majority of two, to impose on that body an obligation to have regard to the long-term stability of the industry. I asked him how he could justify what he was doing, forcing the prices down to the point where firms were going bust and not paying attention to what was in that Act. I have quoted his answer in the House before, and he has never denied it. It was at a semi-public occasion at the Institute of Economic Affairs. He said, “I recognised that Ministers did not want that clause, and I have therefore not paid too much attention to it”. I regarded that as a shocking thing for a regulator to say. But it illustrates the point of my noble friends and the noble Lord, Lord Borrie, that there is always a temptation, either on the part of Ministers to let it be known what their wishes are, or on the part of regulators who try to divine what the Minister’s wishes might be. I yield to no one in my determination that regulators should be wholly independent of both influences.
The relevance of the Bill is that Ministers should not be able to influence the regulator by the order-making procedure under the Bill. In case the Minister is going to argue that this fear is unreal because nobody would do that, I quote the example of Sir Callum McCarthy. Of course, the Government opposed the clause. The noble Lord, Lord McIntosh of Haringey, argued fiercely against it, but he lost the argument in the House, and it is in the Act. It is very important that we should take whatever steps we can in this Bill to strengthen and reinforce the independence of regulators.
6.30 pm
Lord Desai: Subsection (1) of the new clause to be inserted by Amendment No. 47B states:
I remember that, during the passage of the Financial Services and Markets Bill, the posts of chairman and chief executive officer were combined in one person. A small order may need to be placed by a Minister to separate the two roles. That would not be an attackon the independence of the regulator, but the amendment might prevent even such a simple thing. Unlike the noble Lords opposite, I believe that the Bill will do only very small things; it is designed to make the passing of simple orders easier, because it is currently difficult. This amendment would make the passing of a simple transfer order impossible. There would be no regulatory reform ever.The
Earl of Onslow: I can help the noble Lord on that
issue. On the first day in Committee, we got an admission from the
noble Lord, Lord Bassam, that the Bill is to do with primary
legislation only and has
19 July 2006 : Column 1338
My view is that we should be extremely careful, because Ministers can never be trusted. Even my noble friend Lord Jenkin, who was an excellent Minister, should not have been trusted on principle. That is what Parliament is for: not to trust Ministers. When the noble Lord, Lord Bassam, replies, I am sure that he will say that this amendment is not necessary because the Government will not use the power. If it is not necessary and he is not going use it, he can accept the amendment. We do not trust him. Well, let us assume for the sake of argument that we make an exception and trust him of all the Ministers who have ever served the Crown. None the less, we do not trust anybody else. He cannot give that commitment. Either the power is necessary and will be used—in which case, the Minister should tell us when—or it is not necessary and the Government do not want to use it, and therefore they should not have it.
Lord Selsdon: I had not intended to intervene, but I wish to raise the subject of investor confidence. These days, investors have no confidence in Ministers. Noble Lords will recall that 40 per cent of essential services—public utilities—are German owned and25 per cent French owned. International investors, who may not understand the complexities of British political and economic life, rely on stability and the independence of the regulators.
I return to the bizarre and disgraceful incident of Railtrack. Investors had confidence in it until the Government decided that they would step in. Overnight, the rating of the United Kingdom in the international bond market went from AAA to zilch. That was because the bond market, which is critical to long-term investment in public utilities, wants stability. As noble Lords will recall, the bond market plays an important role in financing most acquisitions or investment in public utilities. We are talking of 25-year money at fixed rates placed with institutions—pension funds and others. Such institutions are not thinking of a five-year change of Government; they are thinking about long-term, secure investment. To some extent, they are institutions acting on behalf of institutions, and they require stability and the knowledge that the regulator not only is independent but is perceived to be independent. Thus, if we do not pass an amendment such as this—and I do not wish to go into the technicalities of one or the other—and if the response of the Minister in this debate is not trustworthy and confidence-giving, there will be a little rattling in the bond market. We are not necessarily talking about equity investors; we are talking about the long-term market, which is very sensitive to security and stability.
Lord
Goodhart: We on these Benches have not yet
committed ourselves to support these amendments.
19 July 2006 : Column 1339
Lord McKenzie of Luton: In responding to Amendment No. 47A, I shall speak also to Amendment No. 47B, although I recognise that their thrusts are slightly different. I thank noble Lords who have participated in this discussion.
I must say at the outset that I am unable to accept either of the amendments, for reasons that I hope will convince all noble Lords. I am a bit surprised that the noble Baroness, Lady Wilcox, moved Amendment No. 47A, because it appears to be in conflict with her party’s policy intentions in another place. During the Standing Committee debate on 9 March, the Conservative opposition spokesperson on the Bill in the other place, the member for North East Hertfordshire, Mr Oliver Heald, said:
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