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As the noble Baroness, Lady Wilcox, stated in Committee, and as this amendment seeks to install within the Bill,
- “independence and jurisdiction ... are essential if we are to ensure that private investors will have sufficient confidence in the regulatory system”.—[Official Report, 19/7/06; col. 1332.]
I agree. This Government are ensuring private investment confidence, and the UK is seen by private investors as one of the best places for companies to start, invest, grow and expand. In fact, according to the recent OECD report, Trends and Recent Developments in Foreign Direct Investment, the UK was the world’s largest recipient of inward foreign direct investment in 2005, attracting £91 billion of FDI, the largest inward direct investment ever recorded in the UK. Furthermore, the World Bank’s Doing Business 2007 report ranked the UK sixth, out of 175, in the world and first in the EU for ease of doing business. These statistics alone should provide sufficient confidence to private investors. However, the question this House must ask is: did the Regulatory Reform Act 2001, from which the economic regulators were not excluded, impinge on their independence and jurisdiction? The answer is no.
The House must also ask: did the 2001 Act deter private investment in the UK? Given the World Bank and OECD reports just mentioned, the answer would have to be no. The noble Lord, Lord Norton of Louth, suggested that that was because the powers had not yet produced that impact, but I thought the argument was that their existence created the problem. The existence of those powers in 2001 has clearly not created the problem.
Finally, one might then ask: will this Bill, once enacted, deter private investment, on the basis that investors will see the order-making powers as a potential power to disrupt the market? On the contrary, the order-making power gives confidence not just to the private but also the public and voluntary sectors that this Government are serious about reducing or removing unnecessary burdens on those sectors.
Clause 1(3) makes explicit that one of the Bill’s objectives is to remove obstacles to “efficiency, productivity or profitability”. Given that the Government recognise that investment is one of the main drivers to productivity, they would be extremely unlikely to make, under this Bill, any proposal that would jeopardise productivity through pursuing proposals that would undermine investor confidence. Parliament would also be likely to take a dim view of any such proposal.
This House should be asking itself: will this Bill, once enacted, provide an effective vehicle for cutting red tape? After two previous Acts I hope that this House can be confident in itself to reply in the affirmative.
I was surprised by some of the debate in Committee, which seemed to suggest that, using this Bill, Ministers could amend the regulatory structure on a whim—for example, by removing the chairman of an economic regulator—and as though Parliament had no say whatever in the process. That concern is clearly behind proposed subsection (4) of the amendment.
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Noble Lords will of course be aware that this Bill has more stringent safeguards than the 2001 Act and includes an absolute and unrestricted right of veto for Parliament. Ministers cannot act on a whim. They will also be aware that every order is subject to a statutory consultation process, which requires the Minister to consult such organisations and persons that appear to be representative of interests substantially affected by the proposals, including any body, such as a regulator, whose functions would be affected by the proposed order. The consultation will provide the regulator and industry with an opportunity to make their views known. That point was pursued by the noble Lord, Lord Bradshaw. I hope that he is satisfied on that, and that it is absolutely clear.
The results of this consultation will influence both the Minister and Parliament in reaching a decision on the content of the draft order and the appropriate level of parliamentary scrutiny of it. The results will also influence whether Parliament wishes to approve the order, or whether it exercises its right to veto it.
Furthermore, the preconditions in the Bill and the statutory consultation provisions are not requirements for making primary legislation, the availability of which, in itself, does not lead to regulatory uncertainty or act as an obstacle to private investment. The procedural and substantive safeguards for any order should provide the reassurance that economic regulators and their respective markets need that changes to the regulatory structure cannot be made on a whim. In addition to that certainty, the Government have said throughout the parliamentary passage of this Bill that it is not our intention to erode the independence from the Government of those regulators set up by statute. I hope that that reassures the two noble Baronesses who have pursued that point.
This House will, of course, also be aware of the Government’s undertaking not to deliver highly controversial proposals by order. If a Minister decided to pursue an order in the face of vocal and evidence-based opposition from a regulator—or, indeed, from the regulated, whom we must not forget—this undertaking would also influence whether Parliament wished to approve the order or whether it chose to exercise its right to veto it. In addition to the protections provided in the Bill, I reiterate that businesses that are being regulated must have the right to raise concerns if economic regulators are carrying out their functions, for instance, overly bureaucratically. If there are sound reasons for suggesting any modification of their statutory functions for the purposes of removing or reducing burdens, or of modifying how those functions are carried out, it should be possible to address these by order, as it would be possible for any other regulator. I ask noble Lords why we should not seek to make that distinction. There should be a level playing field.
Lord Berkeley: My Lords, the Minister is very good on the processes that he proposes and has talked a lot about whims, but the mere threat of a change to a regulator is enough to stop investment. This is true of Crossrail. I know that Crossrail is in a Bill, not an order, but simply putting it into a Bill—which is the
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Lord McKenzie of Luton: My Lords, Parliament and Government can set policy on these things quite properly. There is always the option of legislation, whatever the consequences of that may be.
The Earl of Onslow: My Lords, the Minister went on about Parliament having a veto, but we all know what happens down the Corridor: three-line Whips are banged on and the measure goes through, irrespective of people’s moans or whinges. Up here, as we have just seen with the Motion in the name of the noble Lord, Lord Taverne, we do not divide on Orders in Council. The Minister’s undertaking sounds lovely in Whig political theories, and “come back, William III”, but the reality is different.
Lord McKenzie of Luton: My Lords, I have more faith in the parliamentary process than the noble Earl clearly does. The provisions are there to be taken account of and to be put into effect.
It is worth my reinforcing the point that these orders can be of benefit to regulators. I referred in Committee to a consultation on a regulatory reform order to relax the consultation requirements imposed on the Financial Services Authority by the Financial Services and Markets Act 2000. This was referred to. I cite one example—we have not spent a lot of time digging out others—where this was of benefit to the regulator. If these benefits exist, why should we preclude them from being obtained through the use of orders under the legislation and the protections that we have outlined?
As I said in Committee, the economic regulators operate not in a stagnant environment but in an ever-changing and diverse one, and they need to be flexible and responsive to the challenges presented by the markets in which they operate. The House will be more than aware, in this age of climate change, of the growth of energy self-sufficiency and the attendant growth of the microgenerator industry. In a press release issued on 20 January 2006, Ofgem said:
“An increased interest in the connection of domestic-scale microgeneration equipment has raised a number of issues that may require a regulatory response, either now or as the penetration of microgeneration increases”.
Following a consultation on this issue, Ofgem says in its Next Steps document of October 2006 that it is:
- “working to ensure that obstacles to development of microgeneration are identified and addressed, and that, where appropriate, we work with government to ensure that any support is well-designed and works with the competitive market framework.”
I am saying not that orders under the Bill are the solution for dealing with those issues, although they might be, but that this example demonstrates the evolving nature of regulation and that this House should not prevent the economic regulators or any
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3.45 pm
I should also like to add that discussions between Better Regulation Executive officials and the economic regulators have revealed that economic regulators are content not to have a total exclusion from the Bill and that they are exploring the opportunities that the Bill might present. Given the potential better regulation benefits for the economic regulators and those they regulate, 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.
Finally, I shall pick up on one or two points raised during the debate. As regards the fact that the RRC and the DPRRC are not whipped, committees of this House and another place have a statutory right to veto. Whether that could be used to dispense with the services of the chair of any regulator was again raised. It is difficult to see how provisions in this Bill would fall within the vires of the order-making powers in Part 1, although the provision to sack a chairman would fall within the vires of the order-making powers of this Bill. There are currently statutory restrictions on the situation in which the relevant Secretary of State can remove the chair of a regulator. It is difficult to see that existing legislation results in a burden of the sort defined in the Bill. Even if it did, if the burden results only for the Secretary of State, Clause 1(4) rules out an order-making provision to remove or reduce that burden. We are faced with a situation where, in order to protect and ensure that we have independent regulators, we are precluding a benefit taking place because we are failing to recognise the safeguards that this legislation provides, which are substantial and significant.
Lord Lloyd of Berwick: My Lords, I am grateful to the Minister for giving way. I am still not following the argument. If the Government are prepared to give an undertaking not to undermine the independence of regulators, why are they unwilling to put that in writing in the Bill?
Lord McKenzie of Luton: My Lords, it is on the record in these debates. The amendment seeks to do a number of things in addition to that. If the independence of the regulator means that in no circumstances by way of order could we look to address some of the regulatory burdens that may be imposed on the regulated, subject to all the protections in here, it is entirely reasonable that we would want potentially to raise those matters with regulators. Regulators would have the opportunity to be consulted, for their views to be known, for their views to be published, and to influence the process if they disagree. But what if they agree with the Government? Why does it undermine their independence if we allow through the order-making process what they and Government want and what is
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We have reflected on safeguards. For the reasons that I have set out, the Government do not believe that this amendment is appropriate. Certainly, it is not our view. It is right to allow economic regulators to have access to a legislative route to implement worthwhile regulatory reform where appropriate. The Chancellor of the Duchy of Lancaster has been in correspondence with a number of the economic regulators on this issue. Members of this House should be aware that Postcomm, for instance, on 8 August 2006 in a letter to the Chancellor of the Duchy of Lancaster, asked the Minister to consider the application of the super-affirmative procedure in order to give the industry the maximum degree of reassurance in relation to the exercise of the powers in the Bill. Therefore, Members can see that Postcomm has made a suggestion that we believe could deliver a balance between ensuring that the order-making powers can be used for appropriate purposes while at the same time providing, as Postcomm says, the maximum degree of reassurance to industry.
Members of this House will acknowledge that the Government have listened carefully to this House and the other place throughout the passage of this Bill. We continue to listen and should Members indicate that they think an alternative approach to this Opposition amendment is appropriate, the Government will consider this further and return with an appropriate amendment at Third Reading. We would of course consult with Opposition parties on the drawing up of the amendment.
Baroness Wilcox: My Lords, most noble Lords who have spoken today have been in on the Bill from the beginning. I am sorry that the noble Baronesses, Lady Howarth of Breckland and Lady Young of Old Scone, have not been able to join us until this late in the day. I know that the noble Baroness, Lady Young, has been very ill following her riding accident. On behalf of these Benches, perhaps I may say that we are delighted to see her back in her place.
I am lucky indeed to have been supported by my noble friend Lord Norton, the noble and learned Lord, Lord Lloyd of Berwick, and the noble Lord, Lord Goodhart, for the Liberal Democrats, which is marvellous—as well as the support of the expert on the railways opposite. It was absolutely marvellous to hear him speak.
Noble Lords have been patient and there is no point in reiterating all the arguments. I do not share the Minister’s faith that future Ministers will consistently adhere to his undertaking not to pursue controversial orders and not to undermine the independence of the economic regulators, welcome as those undertakings are. However, I am afraid that the shadow of Railtrack still looms over the City. I can only echo the words of my noble friend: protecting the independence of the regulator and to be seen to be doing so is the most important thing we can do here today. I therefore wish to test the opinion of the House.
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3.52 pm
On Question, Whether the said amendment (No. 18) shall be agreed to?
Their Lordships divided: Contents, 96; Not-Contents, 110.
Addington, L.
Ampthill, L.
Arran, E.
Astor of Hever, L.
Attlee, E.
Barker, B.
Beaumont of Whitley, L.
Berkeley, L.
Best, L.
Bridgeman, V.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Bruce-Lockhart, L.
Caithness, E.
Campbell of Alloway, L.
Chidgey, L.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L. [Teller]
Craigavon, V.
Crathorne, L.
Crickhowell, L.
Darcy de Knayth, B.
Dean of Harptree, L.
Elton, L.
Erroll, E.
Flather, B.
Freeman, L.
Garel-Jones, L.
Glenarthur, L.
Glentoran, L.
Goodhart, L.
Griffiths of Fforestfach, L.
Hanham, B.
Harris of Richmond, B.
Henley, L.
Higgins, L.
Hooper, B.
Howard of Rising, L.
Howe, E.
Howe of Aberavon, L.
Howe of Idlicote, B.
Howell of Guildford, L.
Hylton, L.
Jenkin of Roding, L.
King of Bridgwater, L.
Kingsland, L.
Kirkwood of Kirkhope, L.
Leach of Fairford, L.
Liverpool, E.
Lloyd of Berwick, L.
Luke, L.
Lyell of Markyate, L.
McColl of Dulwich, L.
McNally, L.
Marlesford, L.
Masham of Ilton, B.
Monson, L.
Montgomery of Alamein, V.
Morris of Bolton, B.
Neuberger, B.
Noakes, B.
Norton of Louth, L.
O'Cathain, B.
Onslow, E.
Oppenheim-Barnes, B.
Ramsbotham, L.
Reay, L.
Renton of Mount Harry, L.
Roberts of Llandudno, L.
Rogan, L.
Roper, L.
Russell-Johnston, L.
Saltoun of Abernethy, Ly.
Sandwich, E.
Seccombe, B. [Teller]
Selborne, E.
Sharp of Guildford, B.
Sheikh, L.
Shutt of Greetland, L.
Skelmersdale, L.
Slim, V.
Smith of Clifton, L.
Steel of Aikwood, L.
Taylor of Holbeach, L.
Thatcher, B.
Thomas of Walliswood, B.
Thomas of Winchester, B.
Tope, L.
Trenchard, V.
Trimble, L.
Verma, B.
Wakeham, L.
Wilcox, B.
Williams of Crosby, B.
Williamson of Horton, L.
Acton, L.
Adams of Craigielea, B.
Adonis, L.
Ahmed, L.
Alton of Liverpool, L.
Amos, B. [Lord President.]
Anderson of Swansea, L.
Andrews, B.
Archer of Sandwell, L.
Bach, L.
Bassam of Brighton, L.
Bernstein of Craigweil, L.
Boyd of Duncansby, L.
Bradley, L.
Bradshaw, L.
Bragg, L.
Brooke of Alverthorpe, L.
Brookman, L.
Burlison, L.
Chorley, L.
Christopher, L.
Clark of Windermere, L.
Clinton-Davis, L.
Corbett of Castle Vale, L.
Crawley, B.
Davies of Oldham, L. [Teller]
Dean of Thornton-le-Fylde, B.
26 Oct 2006 : Column 1355
Donoughue, L.
Drayson, L.
Dubs, L.
Eatwell, L.
Elder, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Falconer of Thoroton, L. [Lord Chancellor.]
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Finlay of Llandaff, B.
Gale, B.
Gavron, L.
Gibson of Market Rasen, B.
Giddens, L.
Gordon of Strathblane, L.
Goudie, B.
Graham of Edmonton, L.
Grocott, L. [Teller]
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Henig, B.
Hogg of Cumbernauld, L.
Hollis of Heigham, B.
Howarth of Breckland, B.
Howarth of Newport, L.
Howie of Troon, L.
Hoyle, L.
Hughes of Woodside, L.
Jones of Whitchurch, B.
Judd, L.
King of West Bromwich, L.
Kinnock, L.
Layard, L.
Lea of Crondall, L.
Leitch, L.
Lipsey, L.
McIntosh of Haringey, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
McKenzie of Luton, L.
Massey of Darwen, B.
Maxton, L.
Mitchell, L.
Morgan of Drefelin, B.
Parekh, L.
Patel of Blackburn, L.
Pendry, L.
Plant of Highfield, L.
Prosser, B.
Quin, B.
Rendell of Babergh, B.
Richard, L.
Rooker, L.
Rosser, L.
Royall of Blaisdon, B.
Sawyer, L.
Scotland of Asthal, B.
Simon, V.
Smith of Gilmorehill, B.
Snape, L.
Soley, L.
Stone of Blackheath, L.
Strabolgi, L.
Symons of Vernham Dean, B.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Triesman, L.
Tunnicliffe, L.
Turnberg, L.
Turner of Camden, B.
Uddin, B.
Warner, L.
Whitaker, B.
Wilkins, B.
Williams of Elvel, L.
Woolmer of Leeds, L.
Young of Old Scone, B.
Resolved in the negative, and amendment disagreed to accordingly.
4.01 pm
Lord Jenkin of Roding moved Amendment No. 19:
The noble Lord said: My Lords, Clause 4 has aroused some controversy. Whereas the rest of the Bill envisages amendments, repeals and so on, this clause allows subordinate legislation to be made by this order. The House of Commons First Special Report 2004-05 entitled Operation of the Regulatory Reform Act 2001 said:
“The RRC has suggested that the introduction of a power to sub-delegate will be a constitutionally significant extension of the RRO process. They consider that any proposal to introduce a power to sub-delegate will require very careful consideration by the House and would require significant safeguards for the exercise of that power”.
People think it is entirely right that we should have a good hard look at this. There were debates in Committee, but I do not feel that we have resolved the problem.
The function of legislating belongs primarily to Parliament. This clause gives the power to sub-delegate so that other bodies can use the provisions of the Bill to legislate. I wonder whether that is correct. Subordinate legislation usually operates under a specific Act of
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However, the danger in this enabling legislation is that such a general power is being given. Let me use the analogy of a key: if, in the ordinary way, you give the Minister a key to a building and then another key to a specific room inside—that is, the subordinate legislation—you are being very specific about what he has access to. We are being asked under Clause 4 to give Ministers a master key which can be used, as it were, for any room in any building.
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