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26 Oct 2006 : Column 1384

Lord Kingsland moved Amendment No. 37:

“burden” has the same meaning as in section 1(3); “subordinate legislation” has the same meaning as in section 27(9)(b); “the treaties” has the same meaning as in section 1(2) of the European Communities Act 1972 (c. 68) (short title and interpretation).”

The noble Lord said: My Lords, I emphasise at the outset that this amendment is not about the content of the directives themselves. They raise a range of issues that are of great importance but form no part of this matter. The Cassis de Dijon case, decided in the late 1980s, and the White Paper of the noble Lord, Lord Cockfield, which came a few years later, got the Community off to a good start in pursuing its objective of a single market. I think your Lordships will agree that, since then, the results have been like the curate’s egg. I am in no doubt that it will not be long before one or other of your Lordships will again be drawing to our attention matters about the contents of the directives.

The noble and learned Lord, Lord Davidson, has been conducting an inquiry about gold-plating, the background to the issue that this amendment attempts to raise; and we applaud that. It is somewhat surprising that it has taken the Government nine and a half years to get down to studying this issue, because concerns about gold-plating have been expressed at least since the mid. or late 1980s; and, to be fair to the Government, my own party did not address this issue when it was in Government.

I hope that I will be forgiven for being uncharacteristically cynical in seeking a reason for the reluctance of both Governments to look at the issue. Community legislation gets on to the statute book very easily in this country because directives are introduced through Section 2 of the European Communities Act 1972; that section requires only an Order in Council for the legislation to be made. None of the legislation goes through the elaborate process that primary legislation has to go through in your Lordships’ House and another place.

The framework for everything that has been done in the world of Community directives starts with essentially unscrutinised legislation; and that breeds a morass of regulation that is equally unscrutinised, because the only thing that your Lordships' House and another place can do is to adopt it or refuse it, on a take-it-or-leave-it basis. This is very attractive to officials and Ministers for obvious reasons: partly because they are not obliged to defend their case against the Opposition in Parliament, and partly because they can make wide-ranging decisions about how the British economy should work, without having to clutter up the annual demands for primary

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legislation or queue for it. So we get a disproportionately large amount of Community legislation on the statute book because it is very easy to get it there. The other reason is that civil servants—in many cases, no doubt, for very good reasons—have been aching to get matters on to the statute book for years and years but have never succeeded in the annual bid for primary legislation. So they tend to add on to a directive a whole range of purely domestic matters for which they could find no happy legislative home at an earlier stage.

I commend the Government on having had the courage at last to come out of the closet on this issue and on inviting the noble and learned Lord, Lord Davidson, to look at it, in a sense, at a stage removed from Government and to come up with some sensible answers. We applaud the establishment of the Davidson committee, but we feel that we are entitled to ask the Government: why nine and a half years? After all, their task force has been going for almost the same length of time as the Government. If they were so enthusiastic about deregulation, one would have thought that they would have confronted the issue of gold-plating head-on earlier. However, we are all looking forward, as I suppose the Government are, to the noble and learned Lord’s conclusions.

As I understand it, one technique used by the noble and learned Lord, Lord Davidson, in his investigation is to talk to government departments and non-governmental agencies in other member states, which are recognised as having a lighter regulatory touch than ours, to see whether a similar approach would be acceptable in the UK. If that is what the noble and learned Lord has, in fact, done, I find that enormously refreshing. First, by doing so, the Government—or, at least, the noble and learned Lord, Lord Davidson—are accepting that some other nation states apply a lighter touch than us. That, in itself, is good reason for conducting his investigation. But I very much hope that in his report he will give a full account of the work done in this area.

From what has appeared so far on the noble and learned Lord’s website, the questions that he is asking seem pertinent and, in some cases, rather penetrating. His general approach is to ensure that, in future, UK business will not be disadvantaged when competing with businesses in other euro states because of regulatory burdens. I believe that that principle lies behind his investigation. I think that he focuses particularly on whether the implementing measures widen the scope of the original directives. That is a very important area of investigation. You might argue that a directive needs to be elaborated in a certain way because we have law in this country that does not derive from the Community but presents a problem for implementation in exactly the way that the directive suggests. However, I do not think that there is any case for domestic legislation to widen the scope of a directive. That goes to my earlier point about some departments using Community directives to get in purely domestic issues for which they cannot find a primary legislative home.

There are one or two other matters that the noble and learned Lord wisely included in his terms of

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reference. He asks, for example, whether the UK is really taking full advantage of any derogations in the EU measure, and if not, why not. There are wide-ranging derogations in directives simply because member states negotiate hard, and one of the ways for the Community to end up legislating is by making concessions to such member states. They are not described as concessions to Lithuania, the UK or France; they appear on the face of the directive as derogations—sensible conclusions that all 25 states, or however many there are in the European Community these days, agree with.

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The noble and learned Lord will also concentrate on whether enforcement mechanisms themselves, or the sanctions imposed, go beyond the minimum necessary. That matter will be plainly in his sights, as indeed it is in the Bill.

One task that the noble and learned Lord has given himself, which I also find most interesting, is to look at the risks that the Government thought required a measure of gold-plating at the outset—when the directive was implemented—and to assess whether these risks today are still as apparent and of as much concern as they were then. I think that he will ask government departments to address the issue with great particularity.

In the context of the Bill, it seems that the noble and learned Lord’s investigation is absolutely central. That is why I tabled my amendment. I sense that the Government will say, “Well, thank you very much for saying that the Davidson committee has been set up, but, unfortunately, we will not know what it says until long after the Bill leaves your Lordships’ House. Of course, we cannot be absolutely certain that his conclusions will comply with the absolutist tone of your directive. Therefore, let’s wait and see what the noble and learned Lord says, and the issue can then be addressed on some subsequent occasion”.

I shall be very interested to hear what the Minister says in reply. I might be quick-footed enough, if I think there is some weight in what the Government say, to change my amendment before Third Reading, but I am not inclined to let this go if the Government turn me down at this stage. I beg to move.

Lord McKenzie of Luton: My Lords, I thank the noble Lord, Lord Kingsland, for moving his amendment, and for commending the Government for their efforts. I hesitate to nit-pick, but I think that the review by the noble and learned Lord, Lord Davidson, was initiated in the Pre-Budget Report in 2005. It is eight and a half rather than nine and a half years. The review is part of a wider range of things in train, which demonstrates that the Government are serious about this and about avoiding gold-plating.

It is probably a little unfair to suggest that legislation derived from the EU is not subject to scrutiny. The Section 2(2) approach is usually used to make regulations that are subject to either the negative or the affirmative resolution procedure. Of course, EC legislation is carefully scrutinised by the European Parliament as well, so it is not as though there is no scrutiny at all.

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Lord Kingsland: My Lords, I entirely accept both those points. I did not mention the European Parliament because I supposed that it might be said that I perhaps had a conflict of interest, having once sat in it. On the negative or affirmative resolution, I think that I said in my speech that that, indeed, happened but, of course, we have no opportunity to amend on this occasion.

Lord McKenzie of Luton: My Lords, the purpose of this amendment appears to be to introduce a legislative barrier to gold-plating European Community obligations when they are transposed into domestic law through secondary legislation.

As the Government have stated throughout the debate on this Bill, we take the issue of gold-plating and the over-implementation of European Community obligations extremely seriously, and we are taking action to deal with the concerns of business on that. The review that the noble and learned Lord, Lord Davidson of Glen Clova, is conducting for the Government, for instance, is specifically aimed at identifying examples where it is clear that Community obligations have been over-implemented. Where necessary, the review will consider ways of reducing the regulatory burdens imposed on business by the existing stock of legislation implementing Community obligations. I presume that the noble Lord has seen a copy of the interim report of the review, which gives an update on progress. The hope is that the report will now be concluded quite quickly.

It has always been the Government’s policy to implement European Community obligations so as to achieve the objectives of the obligation without over-implementation. The Cabinet Office guidance on the transposition of European directives makes it explicitly clear that only in certain exceptional circumstances and where it is justified by a robust cost-benefit analysis and extensive consultation with stakeholders should departments consider implementation that goes beyond the minimum required by a European directive. The guidance also makes it clear that all decisions to implement beyond the minimum required by a European directive must be made public.

The amendment would preclude any discretion on the part of any Government in the transposition of EC obligations into domestic law by statutory instrument. Is the intention of the noble Lord, Lord Kingsland, really to further limit the discretion of any UK Government to implement Community obligations in a way that best suits the particular circumstances of the UK? I cannot believe that that is his aim.

The interim report of the noble and learned Lord, Lord Davidson, provides a number of specific examples where the noble Lord’s proposed amendment would have precluded the Government from acting in the UK’s best interests. The evidence demonstrates that, by implementing European Community obligations in a way that goes beyond the minimum required by a European directive, the Government can ensure that directives are implemented in line with domestic legislation, meet the UK’s higher standards and reflect the specific requirements of the UK.

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For example, when transposing the temporary work at height directive, the Government extended the scope so that it applied to the self-employed in domestic legislation—something I hope that we all support. By extending the scope of this directive, the Government ensured that it maintained the UK’s higher standards, in line with the provisions of the Health and Safety at Work etc. Act 1974, which pre-dated the EC legislation by 17 years. This ensures equal protection for those who might be injured by people working at heights, regardless of whether the person is self-employed or an employee, and prevents unscrupulous contractors from escaping their health and safety duties by claiming that their employees are self-employed. Were this amendment on the statute books when the directive was transposed into domestic legislation, the Government would have had to accept the lower standards of health and safety set by the EC. This would also have caused unnecessary confusion and inconsistency between similar businesses.

A further example is the 2003 prospectus directive. In this case, representatives of the financial services industry commented that this was an example where the Treasury and the Financial Services Authority had engaged with stakeholders early on and, on industry advice, had taken sensible decisions to maintain higher UK standards than the EC directive prescribed so as to provide higher consumer protection and financial stability. The UK financial markets are the leading markets in the EU and, therefore, changing their regulatory practices to tie in with rules appropriate to less advanced markets may have undermined the UK’s position.

The amendment would present further problems when transposing Community obligations into domestic law. It would require that, in implementing a Community obligation, the Government do not impose or increase any burden that is,

However, it is often impossible to tell, or at least to agree, the bare minimum necessary to implement a Community obligation. The wording of EU directives is sometimes vague and the Government have to make a risk-based judgment about how the European Court of Justice might interpret the wording in question. This amendment would handicap the Government in their attempts to do that and would be likely to lead to numerous challenges in the UK courts by bodies asserting that the Government were going further than necessary. Ultimately, that would use up time and resources and place UK courts in the very difficult position of having to try to second-guess what the European Court of Justice might rule.

I suggest that the provisions in the Bill are, in fact, better placed to respond effectively and pragmatically to the issues of gold-plating and over-implementation than the noble Lord’s amendment. That is because Clause 1 can be used to remove or reduce a burden, which could, in principle, include removing or reducing a burden resulting from implementation of an EC directive that goes beyond the minimum required. Furthermore, Clause 20 makes it possible to combine an order made under Section 2(2) of the European Communities Act 1972 with an order made

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under the Bill to remove or reduce burdens. That will enable a single order to implement Community law under Section 2(2) of the ECA and remove pre-existing domestic statutory provisions that have been superseded by Community law using the power in Clause 1. That will help to reduce occurrences of double-banking.

Given the undesirable restrictions that this amendment would impose, I urge the noble Lord to withdraw it.

Lord Kingsland: My Lords, I am obliged to the Minister for his reply. For reasons beyond the control of both of us, this amendment was not discussed in Committee, so before we conclude this debate I would like to ask him one or two more questions. However, I shall first comment on his contribution. It was extremely full and he obviously took a great deal of trouble over it. I thank him for that.

I was a bit puzzled by the Minister’s remark about the European Court of Justice and the uncertainty that a court might experience when making a decision in the context of my amendment. Whether a directive is implemented in terms or elaborated by the national legislature, an English court is in entirely the same position in relation to a matter of interpretation. Even if a directive has been implemented in national law, the ultimate arbiter of what that law means will be the European Court of Justice. Since we have been a member of the Community, there have been countless occasions when a matter at issue in a dispute over a British statute that derives from a Community directive has been referred by the British court to the ECJ. Therefore, in my respectful submission, the distinction that the Minister makes in that part of his argument is a distinction without a difference.

One of the illustrations to which the Minister drew your Lordships’ attention was social legislation. However, it has always been accepted in the social sector in the Community that a directive provides a minimum series of social standards, not an exclusive series. At no stage has there been an obligation on the UK Government to accept the minimum necessary, and I do not see my amendment covering circumstances such as that.

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The one reassuring point that the Minister makes—and this is the one point that gives me pause for thought about the absolutism of my amendment—was his reference to what I think is called the Cabinet Office transposition guide. The noble Lord nods his head. I am not sure whether it is because of my own negligence or the fact that this document is not easily available that I have not seen it; it is probably the former. But I was very interested to hear what the Minister said about it because it suggests that if what is contained in the transposition document is widely applied by departments, then gold-plating ought not to be a problem. These are very strict requirements in the document.

Can the Minister tell us a bit more about the document, its degree of transparency, the frequency

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of its updating and, above all, the authority it carries with Secretaries of State and, in particular, Permanent Secretaries in departments? How thoroughly are regulations supervised by Permanent Secretaries to ensure that the Cabinet document to which the Minister referred is actually complied with? The way he described the document suggests that it ought to be extremely difficult to gold-plate any Community directive.

The Minister may feel that at this stage he cannot answer these questions—I do not know. I apologise to him for putting him to the trouble of having to stand up another time. When I drafted the amendment I had not really addressed this area, so this is a genuine inquiry.

Lord McKenzie of Luton: My Lords, I thank the noble Lord for those questions. I will try to answer them as best I can. The guidance is a document which changes from time to time to deal with changing circumstances. Indeed, in our earlier debate we touched on how it might be used as the mechanism to deal with the point raised by the noble Viscount, Lord Colville.

Part of that guidance requires the regulatory impact assessment to be produced when transposition takes place. That sets out the analysis that must be undertaken. The guidance is on the Cabinet Office website; all departments are aware of it; it is updated regularly; and it is expected that it would be complied with. If the noble Lord is unable to access it readily, perhaps he will let me know and I should be happy to provide him with a copy and the documentation that surrounds it.

On the European Court of Justice, under the proposed amendment legislation cannot be introduced in the UK that is not absolutely necessary to implement a Community obligation or right. If, under the drafting of that Community obligation or right, there is uncertainty about what it might mean, when it is transposed into UK legislation there would be a risk—would there not?—that somebody could come along and say that this is doing more than is absolutely necessary. Therefore, there is another area for contention about how that legislation is introduced. I think that that is the key point.

We read the amendment as precluding dealing with social aspects of legislation. It seemed to me to be an absolute issue—that you should not do anything that was not absolutely necessary to implement the Community obligation. One would think that that would mean that, other things being equal, if there were a range of dates for its implementation you would have to introduce it at the latest period that you could because it would be doing more than was necessary to do so earlier—for example, where you would have to take advantage of all the derogations. How would that impact on what is proposed?

The issue of timing and some of these points are touched upon in the interim report by my noble and learned friend Lord Davidson. That might be worth a review. I hope that I have dealt with the key points the noble Lord has raised. If not, I will try again.

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Lord Kingsland: My Lords, I do not propose to return to the question of the interpretation of the European Court of Justice or of social legislation. Suffice it to say that, if social legislation deriving from purely domestic measures sets higher standards than those in the directive, my amendment would not affect those social rules, which derive from purely domestic legislation. It would therefore in no way inhibit the United Kingdom from having higher standards than those in the directive.

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