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I understand that the noble Lord, Lord Goodhart, has raised anxieties about this clause with the Minister. I rely for that on the letter which the Minister wrote to all of us on 11 October. Under a passage headed “Sub-delegation”, he mentioned that the noble Lord had brought to his attention an issue relating to a clause,

I suspect that many noble Lords present have received copies of the letter. The Minister continued:

That was added at the Committee stage. The Minister went on to say:

That is all very well, but there is absolutely no indication of what the safeguards will be. The House needs to be told what the additional safeguards are to which the Minister referred in his letter, and which will provide the protection that we would want to see. The clause gives the power for subordinate legislation to legislate. That should not be as, by and large, it appears in this clause. I think that the Minister has recognised that by saying that there will be limits, but he has not set out what they will be. Different limits may be appropriate to different conditions and circumstances. I should be grateful if the Minister could in his reply give us a clearer indication of what the Government have in mind for the conditions they will attach to the power to legislate. I beg to move.

Lord Bassam of Brighton: My Lords, the amendment would remove Clause 4. It may be intended to have the effect of preventing orders made under Part 1 conferring powers of legislating. However, since Clause 4 places restrictions on that ability, the amendment would leave the ability to

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confer the function of legislating untouched, since it would merely remove the restrictions on it.

I do not want to repeat arguments which I have set out previously when discussing the provision in Clause 4, but I will reiterate the key points that need to be considered when looking at the merits of retaining an ability to confer powers to legislate by order and of retaining the restriction on the power currently provided for in the Bill.

The ability to confer the function of legislating by order is essential if we are to ensure that it is possible for orders to deliver large-scale reforms to entire regimes. As with Bills, it is not always possible, or appropriate, for all the detail of a statutory regime to be set out in primary legislation. Powers to make secondary legislation are important also because some aspects of an order might need subsequent amending or updating. That is already possible under the 2001 Act, whereby provisions in orders can be designated as subordinate and be easily amended in future.

I am sure that noble Lords will be aware that the Delegated Powers and Regulatory Reform Committee has commented that including such a power in the Bill for orders to be able to confer the function of legislating is not inappropriate. The committee also recommended that the power to confer legislative powers by order, while not inappropriate, should be subject to further restrictions.

The Government have responded to these concerns. We have strengthened the restrictions on the power through the amendments we made to Clause 4 in Committee. The power to confer legislative functions by order is limited in important ways by Clause 4. The Bill restricts the persons or bodies eligible for such powers to three categories. The first is Ministers, the category of persons most likely to be given powers to legislate as part of future orders. The second category is persons or bodies who have statutory functions conferred on them. This will ensure that powers to legislate can be given only to persons or bodies already recognised by Parliament as suitable to have functions conferred on them.

The third category is a body, or the holder of an office, created by the order itself. This will ensure that the Bill can be an effective vehicle for delivering mergers of regulators, such as those recommended through the Hampton review, when, for instance, a new body is being created by order to take on functions of an existing body and the merger is for the purpose of removing or reducing burdens upon the regulated. Without the power, it would be necessary to deliver such valuable reforms in more than one order, using one to set up the appropriate new body and another to confer functions upon it, rather than this all being done by the same order. This is something that I am sure that noble Lords would agree would be unnecessarily cumbersome and bureaucratic.

I should also make it clear that there are of course other important safeguards in the Bill, including the statutory veto, to protect against the inappropriate use of this power. Clause 4 also makes explicit that it will not be possible further to delegate powers conferred by order to others. Ultimately, however, if Parliament is unhappy with the proposals to confer

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functions, the order can be voted against. All orders must pass through the prescribed parliamentary procedure and, if either House objects, the order cannot be made.

The ability for orders to confer powers to legislate, along with the important restrictions on that ability set out in Clause 4, are a key part of the order-making powers in the Bill. For those reasons, I cannot support the amendment and therefore ask that it be withdrawn.

The noble Lord asked, too, what safeguards the order would contain. I have set out some of them, and am happy to write giving a more in-depth explanation, but it is worth saying that the order conferring the power to legislate would in any event have to specify on whom the power was conferred, the type of legislation they could make and the procedure to which they would be subject—namely, the negative or affirmative procedure. I am happy to continue a dialogue outside this Chamber on these matters if there are details that trouble him and other noble Lords.

Lord Jenkin of Roding: My Lords, the Minister reminded us that if either House uses the veto powers, that is the end of the matter and the thing has to be dealt with by primary legislation. He also made it clear that the powers to sub-delegate can be given only to bodies for which Parliament has already approved power to legislate in these circumstances. That goes some way to meet my concerns, but it would be helpful if the Minister could write a letter setting out what he touched on very briefly at the end of his speech. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 [Taxation]:

Lord McKenzie of Luton moved Amendment No. 20:

The noble Lord said: My Lords, I shall also speak to Amendment No. 21. Clause 5 restricts the powers in Clauses 1 and 2, preventing an order imposing or increasing taxation. Concerns were raised in Committee that, unamended, the Bill would leave it open for a Minister by order to reduce or remove taxation. That is not the intention. The first of these amendments will make it clear that an order under Part 1 cannot be used to impose, abolish or vary any tax.

The second amendment concerns potential tax liabilities that could arise from the merger of regulators. When transferring regulatory functions from one regulator to another it may be necessary also to make provision in an order to transfer assets and liabilities from the old to the new regulator. In certain circumstances, without further provision, a transfer could result in inappropriate tax consequences for the transferor or transferee body that would arise solely because of the transfer. This amendment addresses those unwanted consequences. It allows the Treasury to make tax provision by regulations in relation to a transfer of property, rights and liabilities by an order under Part 1. This power will allow the Treasury to make appropriate tax

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provision at the appropriate time to ensure that a transfer does not give rise to a tax charge or confer a tax advantage on either party. It is unlikely that these powers will be needed to be used often, and then only in the unusual circumstances that a merger is being pursued by order that involves the transfer of property, rights and liability. I beg to move.

On Question, amendment agreed to.

4.15 pm

Lord McKenzie of Luton moved Amendment No. 21:

(a) any property, rights or liabilities transferred by or under an order under this Part; or (b) anything done for the purposes of, or in relation to, the transfer of any property, rights or liabilities by or under an order under this Part. (a) a tax provision not to apply, or to apply with modifications, in relation to any property, rights or liabilities transferred; (b) any property, rights or liabilities transferred to be treated in a specified way for the purposes of a tax provision; (c) the Minister of the Crown making the order to be required or permitted, with the consent of the Treasury, to determine, or specify the method for determining, anything which needs to be determined for the purposes of any tax provision so far as relating to any property, rights or liabilities transferred. (a) a tax provision not to apply, or to apply with modifications, in relation to anything done for the purposes of or in relation to the transfer; (b) anything done for the purposes of or in relation to the transfer to have or not have a specified consequence or be treated in a specified way; (c) the Minister of the Crown making the order to be required or permitted, with the consent of the Treasury, to determine, or specify the method for determining, anything which needs to be determined for the purposes of any tax provision so far as relating to anything done for the purposes of or in relation to the transfer. “relevant tax” means income tax, corporation tax, capital gains tax, stamp duty or stamp duty reserve tax; “tax provision” means a provision of an enactment about a relevant tax.”

On Question, amendment agreed to.

Clause 6 [Criminal penalties]:

Lord Norton of Louth moved Amendment No. 22:

The noble Lord said: My Lords, Amendments Nos. 23 and 24 are consequential. We discussed in Committee the extent to which order-making powers

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could be used to impose or repeal penalties involving fines and imprisonment. I expressed the view that we had to be circumspect in providing that any body other than Parliament itself could prescribe specified offences carrying terms of imprisonment. I tabled amendments designed to limit the scope for imposing or repealing penalties carrying terms of imprisonment.

I listened carefully to what the Minister had to say in response. My amendment takes account of what he said. I have decided not to pursue amendments affecting the repeal or modification of existing offences. I can see that there may be a case for retaining those powers in order to remove burdens, but I do not consider that approach the best one. I would have preferred the proposal advanced by my noble friend Lord Goschen; namely, that of an annual deregulation Bill, a medium through which offences could, with Parliament’s assent, be removed or created. However, if we are to have this Bill, I am prepared to concede the power to modify or remove existing offences.

I think, though, that there remains a case for requiring primary legislation for new offences. My amendment provides that no new offences may be created under Part 1, and that the penalty for existing offences may not be increased so that they are punishable on indictment for a term exceeding two years, or on summary conviction imprisonment for a term exceeding the normal maximum term or a fine exceeding level 5 on the standard scale.

The case for the amendment is straightforward. New offences, especially those carrying terms of imprisonment, should be introduced through primary legislation and subject to the full rigours of legislative scrutiny. There is greater scope for probing and considering amendments than is the case with the order-making power. Parliament needs to be at its most rigorous and operating in the full glare of public attention when it introduces new offences that may result in individuals being sent to prison.

What, then, is the argument for allowing new offences to be created by secondary legislation? In Committee, the Minister argued that a new offence would be subject to the safeguard that Ministers would need to ensure that the preconditions in Clause 3 were met, and that the order could be vetoed by the relevant parliamentary committee. He also pointed out that the provision was carried over from the 2001 Act, and that the provision had not been abused.

Those arguments are not sufficient to overcome the point of principle in question. The fact that a provision is carried over from the 2001 Act is not, to my mind, a commendation, as I variously argued on other points earlier today. I was as critical of that measure as I am of this one. The Minister’s own words could be used against him. To claim that the provision has not been abused is to concede that it could be.

In essence, the choice is between a point of principle and one of convenience. We may be willing to concede that burdens including criminal sanctions may be removed by secondary legislation and that existing sanctions may be modified, but I think we should be extremely wary of permitting, or continuing to permit, the creation of new sanctions by secondary legislation. I beg to move.

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Lord Bassam of Brighton: My Lords, Amendment No. 22 and its consequential Amendments Nos. 23 and 24 seek, as the noble Lord described, to prevent any order creating any new criminal offence.

Taken in isolation, I could understand that the powers to create new offences might raise some concerns. However, the creation of a new criminal offence by order could not be done arbitrarily. This ability is entirely limited by the vires of the order-making powers so that criminal offences could only be created by order for the purposes of either Clause 1 or Clause 2; that is, they would have to be for the purpose of removing or reducing a burden for any person or securing that regulatory functions are exercised in accordance with the principles of better regulation. In an order made under Clause 1, the creation of a new offence would have to be for the purpose of removing or reducing a burden defined, for example, as a financial cost, an administrative inconvenience, an obstacle to productivity, profitability or efficiency or, most importantly, perhaps, in this context, an existing sanction.

Furthermore, the provisions in Clause 1 provide a power to remove or reduce burdens resulting from existing legislation and could not be used to create entirely new regimes. They could, however, be used to replace one statutory regime with another that is less burdensome for any person. In such cases, there might be an existing criminal offence which is no longer considered to be well targeted. This may be, for example, because it applies to too wide a category of situations or persons. The order might then contain provision to replace the existing criminal offence with a new narrow one which was felt to be better focused, where this was for the purpose of reducing or removing the burden of the existing wider criminal offence.

One of the key problems with the 2001 Act is that it contained a number of arbitrary technical restrictions. This prevented proposals being implemented in perhaps the most logical way. In some cases, the restrictions formed such a barrier that it did not make sense to deliver the proposal by order, delaying or preventing, in our view, the delivery of better regulation. We need to avoid creating new technical restrictions, particularly regarding sanctions, which form a major part of ensuring compliance and hence the success of a regulatory regime.

The powers to create new criminal offences provided for in the Bill are not unprecedented. As noted in Committee, this power has parallels in the European Communities Act and as the noble Lord, Lord Norton of Louth, has observed, was carried over from the 2001 Act. I know he does not accept the point, but that is the case.

Clause 6 also specifies the limits on the level of sanctions that may be imposed. These are less than those already contained in a number of regulatory regimes, so the maximum levels in Clause 6 set meaningful limitations to this power. Furthermore, the Government have already made a commitment not to deliver highly controversial proposals by order. Proposals which create inappropriate new criminal offences will clearly come into that category, so that is the limiting effect of our commitment.

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In addition, the pre-conditions in Clause 3 prevent a Minister making an order which he considers, among other things, to remove necessary protections or to prevent anyone continuing to exercise any right or freedom which they might reasonably expect to retain. This opinion would have to take account of any representations received during the statutory public consultation period and would be scrutinised by parliamentary committees which have the power, as we have explained on many occasions, to veto any proposal they consider unsuitable for delivery by order.

I understand where the noble Lord is coming from. I know that he will not find it easy to accept the constraints which we argue we have put in place because he thinks we should do this through primary legislation, but I would invite him to consider that we have provided real constraints and a narrowing. I hope he will recognise that this is a practical measure and will withdraw his amendment.

Lord Norton of Louth: My Lords, I understand where the Minister is coming from. I was not implying that there was unrestricted power to introduce through an order a term of imprisonment for anything other than what is prescribed in the Bill. He is right about what the measure could be introduced for. It is narrowly limited by the Bill. I do not question that.

As the Minister recognises, there probably will not be a great meeting of minds on this. I still have two problems with the measure. I would not object to a change in wording that made clear that where an offence was introduced it was to replace one in order to reduce a burden. My concern is with its being introduced completely freestanding as a new offence.

I have two sticking points. One is simply the point of principle. I refer to the point I made about principle versus convenience. The argument for the Bill is one of convenience. On the point of principle, even if narrow limitations are applied, as the Minister said, if the measure imposes a term of imprisonment that is a new offence. Parliament should have the opportunity to probe that measure and amend it through primary legislation. I believe that the Minister referred to it as a technical restriction. However, I consider that it is a very important point of principle.

The other point is more general and has been an underlying theme of our debates today. The Minister said that the Government had given an assurance that contentious measures would not be introduced. As we keep pointing out, while we accept his word, he cannot necessarily commit his successors. Given that I have those problems with the measure, I shall want to reflect further on it. I see the point about the possibility of replacing an offence. I shall want to reflect further on that, but it is not a point that I wish to press this afternoon. I hear what the Minister says, but, as he says, we are coming at the matter from slightly different perspectives. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 23 and 24 not moved.]

Clause 8 [Excepted enactments]:

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