Select Committee on Delegated Powers and Deregulation Seventh Report


17 February 1999

By the Select Committee appointed to report whether the provisions of any bill inappropriately delegate legislative power, or whether they subject the exercise of legislative power to an inappropriate degree of parliamentary scrutiny; to report on documents laid before Parliament under section 3(3) of the Deregulation and Contracting Out Act 1994 and on draft orders laid under section 1(4) of that Act; and to perform, in respect of such documents and orders, the functions performed in respect of other instruments by the Joint Committee on Statutory Instruments.



1.  This bill changes the way in which the National Health Service is run in England, Wales and Scotland. It will thus effect the vast majority of citizens of the United Kingdom, either as patients or, in the case of a considerable number, as employees. The bill deals with three distinct matters - the running of the National Health Service in England and Wales (Part I) and Scotland (Part II), the control of prices of medicines and profits (clauses 26 to 31); and the regulation of health care and associated professions (clause 47 and Schedule 3). This report discusses the powers under these headings.

2.  There are many delegated legislative powers in the bill: these are identified and discussed in the Department's memorandum. This report does not list all the powers, but discusses only those provisions which, in the Committee's view, raise issues for the House to consider.


3.  In its full and helpful memorandum on the bill,[1] the Department explained that in determining whether matters should be left to delegated legislation it has weighed the importance of the individual matter against the need to avoid too much technical and administrative detail and to ensure appropriate flexibility not least in order to respond to changing circumstances. This approach is set out in more detail in paragraph 5 of the memorandum. The Department has also drawn attention to the existing legislative structure, in particular the National Health Act 1977 and the National Health Service and Community Care Act 1990. They explain that much of the Bill consists of modifications or additions to that structure. They rightly state that there is very little prescription in the existing primary legislation as to what the Secretary of State or NHS bodies must do or indeed how they must do it. The matter is left largely to directions or regulations. The Department justifies the continuance of this approach in the following way. "The National Health Service is a large and complex organisation, which provides services and performs other functions in a variety of different ways. The existing legislation governing the Health Service is sufficiently flexible to cope with a variety of different circumstances, and the government does not wish to restrict this flexibility unnecessarily. It would not be possible to deal with every aspect of how the NHS operates, and provide for every eventuality, in primary legislation, without producing legislation of great length, complexity and detail." The Committee is conscious of the approach taken in earlier legislation and invites the House to regard the broad approach adopted by the Department as appropriate.

4.  In essence current legislation provides a statutory framework but gives the Secretary of State wide powers to control the bodies created by or under the legislation. He can do this in part by securing control over the supply of money, in part by using the powers he is given to make regulations and in part by using the powers he is given to give directions (which are given in writing but do not become statutory instruments). While the bill makes radical changes (including abolishing GP fund-holding and creating Primary Care Trusts) it continues to provide for the Secretary of State to have control and creates new powers for him to make regulations or give directions. The Committee discusses some of these new powers in the following paragraphs.

5.  Clause 2 inserts in the 1977 Act section 16A under which the Secretary of State may by order establish Primary Care Trusts. There will be a separate order for each Primary Care Trust, and the Bill provides that they will be made as statutory instruments, following the approach taken for NHS authorities and NHS Trusts in the existing legislation. Paragraph 24(2)(a) of Schedule 4 to the Bill provides that these orders will not be subject to the negative resolution procedure, which applies generally to orders under the 1977 Act. The Explanatory Notes state that each PCT will serve a population of at least 100,000, suggesting some 500 PCT orders, each with provisions designed to meet local needs. The Committee considers that it would be impractical for Parliament to scrutinise this number of statutory instruments in any detail, and therefore accepts that it is appropriate that the bill does not provide for any form of Parliamentary control.[2]

6.  The primary legislation contains no description of the key tasks of the PCTs. As Parliamentary scrutiny of each order is clearly impractical, the House may wish to explore whether the primary legislation might provide a general framework for the PCTs[3] which will provide a statement of the purposes and objectives within which the regulation-making powers can be exercised.

7.  Clause 2 also inserts in the 1977 Act a new section 16B about the exercise of functions by PCTs. Regulations under this section will be subject to negative procedure. Considerable concern was expressed during the second Reading debate about the lack of detail in this clause (and Schedule 1) about the constitution and powers of Primary Care Trusts. As the Department of Health's memorandum states, the power to make directions is a particularly important feature of Part I of the 1977 Act:

    "Sections 2 to 5 of the 1977 Act set out the services that it is the responsibility of the Secretary of State to provide (ie. Part 1 services). The Secretary of State may delegate these functions to Health Authorities by directions under section 13 and then control the exercise of these functions under section 17. Otherwise, there is very little prescription as to what the Secretary of State must do or how he must do it. At present the Secretary of State delegates most of his functions to Health Authorities, and he will continue to do so."[4]

While the House may wish to discuss whether there is a need to set parameters for this power, the Committee understands within the context of the NHS the approach taken by the Department.

8.  It is intrinsic to the broad approach of the legislation that it provides for a significant number of powers to be exercised by means of the giving of directions. "Directions" first appear in clause 3 (see new sections 97C(5) and 97D(2), (3), (7) and (8)). The 1977 Act contains some general provisions about directions. Section 18 (directions under sections 13 to 17) is replaced by clause 7(2). The new section 18 applies to directions under sections 11, 16C, 17 or 17A (sections 16C, 17 and 17A are set out in clause 7(1)). The effect of section 18 will be that some directions must be given by regulations, others may be given by regulations or by an instrument in writing while the remainder can be given only by an instrument in writing. The House might wish to seek elucidation from the Minister as to the basis whereby he may choose one course of action rather than the other.

9.  Any regulations will be subject to negative procedure (section 126 of the 1977 Act) but where directions are not given by regulations, the text will not be a statutory instrument. Directions under other powers created by the bill are not covered by section 18 but may be the subject of specific provision (eg. clause 15(6) - directions under this clause must be given in writing and may be varied or revoked by subsequent directions) or, if they are inserted into existing legislation, they may attract a general provision in that legislation. Section 126(3) of the 1977 Act provides that any power to give directions under that Act includes power to vary or revoke the direction and section 126(4) extends a power to which section 18 applies (see above) so that, for example, the power may be exercised in relation to all cases or subject to specified exceptions or in relation to specified cases or classes of case. Section 126(4) also allows directions to which it applies to include incidental or supplemental provision. These extensions will apply to the power to give directions under sections 97C(5) and 97D(2), (3), (7) and (8) (inserted in the 1977 Act by clause 3).

10.  Clause 7 of the present Bill restates sections 13, 17 and 18 of the 1977 Act. In addition, it expands section 17 to cover NHS Trusts, and provides for a scheme of delegation under which Primary Care Trusts have their functions conferred upon them. The Secretary of State may issue directions to Health Authorities under section 17 "as to how they should exercise any of their other functions, for example their functions in relation to Part II services."[5]

11.  Clause 8 introduces amendments to the National Health Service and Community Care Act 1990. That clause and clause 9 amend section 5 of the 1990 Act under which there is a power to make orders. Those orders are statutory instruments but are not subject to Parliamentary control.

12.  Clause 15 is concerned with the functions of the Commission for Health Improvement established by clause 14. Subsection (2) creates a power to make regulations which extends to prescribing the matters referred to in subsection (1)(e). Regulations are subject to negative procedure (clause 48(4)) and are extended by clause 48(3) to allow the inclusion of provision amending or repealing any enactment, instrument or document. This makes clause 14 a Henry VIII clause but in view of the very limited scope of the power, the Committee accepts that negative procedure is appropriate.

13.  Clause 24 also creates a regulation making power which is converted into a Henry VIII power by clause 48(3). This clause provides that the Secretary of State may make provision in regulations enabling NHS bodies and local authorities to enter into certain kinds of arrangements as respects the exercise of health and health-related functions, provided that "the arrangements are likely to lead to an improvement in the way in which those functions are exercised"[6] - it is unusual (though refreshing) for a bill to stipulate that the use of a regulation-making power is only permissible if it improves the status quo. The regulations are subject to negative procedure. The Department's memorandum[7] states that "the arrangements, which will enable significantly different approaches to the exercise of NHS and local authority functions, are untried and untested".[8] The Committee considers, however, that the negative procedure is appropriate as the scope of the power is limited.

14.  Part II makes similar provision for Scotland. There are differences - for example, the Committee can find no equivalent to section 18 of the 1977 Act (see comments on clause 7 above) and so there appears to be nothing to expand the references to directions in clauses 38, 40, 42 (new sections 85AA(8) and 85(3)) and 45.

15.  The Committee draws the attention of the House to the width of the powers in this Part of the bill, and to the need to strike the appropriate balance between flexibility and an adequate level of parliamentary control. If the House is of the opinion that Parliament does not have sufficient control over the creation of Primary Care Trusts, it may wish to consider amending the bill to include a statement of the purposes and objectives of PCTs.


16.  Clauses 26 to 31 establish a scheme for controlling the prices which may be charged by any manufacturer or supplier for the supply of a medicinal product "used to any extent for the purposes of the health service" (clause 31(6)), and for limiting the profits which may accrue from such supply. The clauses are not limited to supply to the NHS but appear to cover supply to customers in shops or, indeed, to supply for the export trade. The clauses do not exclude manufacturers or suppliers abroad who provide medicines for use in the UK. The Department has provided a supplementary note on this point, which is printed with this report. Section 57 of the 1977 Act allows the Secretary of State to make provision by order for controlling the maximum prices to be charged for any medical supplies required for the purposes of that Act and subsection (2) of that section allows him to impose by directions requirements as to records and the provision of information. A failure to comply with such an order or directions is an offence punishable with imprisonment or a fine (paragraph 7 of Schedule 11 to the 1977 Act). In practice a voluntary scheme has operated successfully to control prices. The new scheme goes wider than section 57 as it controls profits but the section is not repealed by the bill as it applies not only to medicines but also to other medical supplies and clause 31(5) confines it to supplies other than medicine.

17.   Clause 26 is described in the bill as "powers relating to voluntary schemes" and it applies only to those manufacturers and suppliers who have consented to the scheme made under the clause applying to them (see subsection (2)(a) ).However, consenting to the application of the scheme has important legal consequences. Under subsection (3) the Secretary of State can impose requirements as to keeping and providing information and under subsection (4) he can prohibit price increases without his approval and require the repayment of unapproved price increases. Those requirements could be imposed by making regulations or giving directions to a particular manufacturer or supplier (clause 31(1)) and so the penalty provisions of clause 30 would apply. Clause 26 is certainly a voluntary scheme with teeth.

18.  Clause 27 is one alternative to a voluntary system of price control. Under this clause the Secretary of State may, after consultation with the industry body (defined in clause 31(6)), limit prices and provide for sums charged in excess of those limits to be paid to him. Again section 31(1) applies to allow the Secretary of State to act by making regulations or giving directions to a particular manufacturer or supplier.

19.  Clause 28 is the other alternative to a voluntary scheme - a statutory scheme made by the Secretary of State limiting prices and profits. In addition to limiting prices and profits a statutory scheme can require a manufacturer or supplier to pay to the Secretary of State sums deriving from over-pricing or representing excessive profits. Again section 31(1) applies and the scheme is to be implemented by regulations (or, which seems unlikely), by directions given to a particular manufacturer or supplier). Clause 29 contains supplementary provisions concerning the establishment of statutory schemes. The clause gives the Secretary of State powers to compel manufacturers and suppliers to record and keep information and provide it to the Secretary of State. Again clause 31(1) applies and the Secretary of State may proceed by way of regulations or directions but whichever he chooses a contravention makes the manufacturer or supplier subject to a penalty under clause 30.

20.  Clause 30 allows the Secretary of State to make regulations providing for a person contravening regulations or directions under clauses 26 to 29 to pay a penalty (civil) to the Secretary of State. That penalty may not exceed £100,000 (or a daily penalty of £10,000) and these limits in their application to cases of excessive profits can be increased by up to 50 per cent by regulations made by the Secretary of State. Regulations can make a penalty carry interest. Subsection (6) is a Henry VIII provision allowing the Secretary of State to increase by order the sums specified in the clauses as the maximum penalties.

21.  The Committee is concerned about the considerable width of these powers, which are proposed for the particularly sensitive areas of control of prices and profits and the disclosure of information. The explanatory notes explain that "branded medicines are specialised products, the development of which incurs considerable research and development costs. The products have limited inter-changeability in many circumstances, and new medicines are subject to patent protection. This gives companies a period of market exclusivity. In this context, the Government is taking powers to ensure that prices are fair and reasonable to the NHS and to companies."[9] The Secretary of State has to strike a difficult and indeed delicate balance between protecting the interests of that service with those of the manufacturers. In any event, as currently drafted the bill gives the Secretary of State the final say in any disagreement between the Department and the industry.

22.  The Committee considers that, as presently drafted, the power of the Minister to give directions is not circumscribed by sufficient safeguards that this power will only be used in an appropriate manner. In "taking powers to ensure that prices are fair and reasonable to the NHS and to companies",[10] the Government has an obligation to ensure that those powers are of themselves fair and reasonable. We invite the House to consider amending the bill to make provision for an appeal against a decision by the Secretary of State regarding the control of prices or profits, or the disclosure of information, to an independent tribunal (either on the face of the bill or by way of a requirement to provide an appeal in the regulations), in a process which is speedy and as open as commercial confidentiality allows.

23.  The maximum financial penalties for contravening any provision of regulations or directions made under sections 26 to 29 are high, although they need to be considered in the context of the profits of some pharmaceutical companies, and clause 30(6) provides for these already high maxima to be increased by order. We also suggest that the House may wish to consider amending the Bill to make the Henry VIII power in clause 30(6) subject to affirmative procedure.


24.  Clause 47 allows an Order in Council to modify the regulation of the professions listed in subsection (2) and to regulate any profession at present regulated under the Professions Supplementary to Medicine Act 1960 (which the bill repeals) or any other profession concerned with the physical or mental health of individuals which appears "to require regulation in pursuance of this section". Schedule 3 supplements the clause. An Order in Council under this power is subject to affirmative procedure (clause 48(6)). In Schedule 3, paragraph 2 makes the power a Henry VIII power; paragraph 6 limits the offences which can be created to those punishable on summary conviction with a fine; and paragraph 9(1)(b) requires consultation with such person as the Secretary of State may consider it appropriate to consult as representing the profession to be regulated.

25.  The Department's memorandum explains that the enactments that currently regulate the health professions make detailed provisions which, with very few exceptions, may only be changed by means of primary legislation. It has hitherto not proved possible to make amendments as promptly as would be desirable.[11] It also states the Department's belief that "the majority of the changes made by these Orders will be at the request of the professions."[12]

26.  The Committee attaches particular importance to the consultation process outlined in paragraphs 143 and 144 of the Department's memorandum. This provides for a two-stage consultation process, not dissimilar to that provided for deregulation proposals. We also note that "it is anticipated that in most cases the professions will wish to consult their members and other interested parties before any decision is taken to draft an Order."

27.  Considerable concern has been expressed about the width of this power, and its effect on the principle of professional self-regulation. The Committee understands this concern. Orders "may make changes to any aspect of professional regulation",[13] and may relate to the transfer of functions. Furthermore, the power in clause 47 "would cover health care professions not already brought within statutory regulation."[14] But the power needs also needs to be considered in the light of the fact that at present the principle of professional self-regulation has to be applied in circumstances where the profession concerned is regulated by existing legislation and changes requested by the profession may have to wait for a considerable length of time before the appropriate legislative opportunity arises.[15] So the problem is one of striking the right balance to protect the interests of all concerned parties. This may be particularly important if bodies within a profession disagree over a proposed change.

28.  The bill already provides for affirmative procedure, but this has not been sufficient to allay some fears. Further concern was expressed at second reading that Parliament cannot amend statutory instruments. In the light of these concerns the House may wish to consider whether the Bill should be amended to require the Minister, when laying a draft order, also to lay before Parliament a summary of representations received, showing in particular whether the professional body affected by the draft order had (a) been consulted, and what was the result of that consultation; (b) had agreed the provisions in the order; or (c), if not, the reasons for making the order without the consent of the profession concerned. The Bill might also be amended to include a statement of the criteria against which the Minister could act in the absence of agreement with the professional body or bodies concerned, for example, "for the protection of the public and for the better development of the profession."


29.  The Committee wishes to draw the attention of the House to the drafting of clause 15 (functions of the Commission). Regulations will set out the limitations and conditions on which the Commission will exercise its powers to inspect premises and obtain information. The Department's explanatory memorandum states that it has deliberately placed safeguards regarding confidential personal information, in particular information about patients, on the face on the bill rather than leaving them to regulations. "In part they [the safeguards] are to ensure that the provisions are compatible with Article 8 of the European Convention on Human Rights (the right to respect for private and family life)."[16] The Committee hopes that this Bill may help to establish a precedent whereby provisions designed to ensure that legislation is implemented compatibly with the European Convention on Human Rights are not normally left to secondary legislation but included on the face of the bill.


30.  The Committee wishes to draw the attention of the House to its recommendations concerning the lack of Parliamentary control over the creation of Primary Care Trusts, the provisions in the Bill for pharmaceutical price regulation (Clauses 26 to 31) and the provision enabling the Queen to regulate health care and associated professions by Order in Council (Clause 47 and Schedule 3). There is nothing else in this bill to which the Committee wishes to draw the attention of the House.[17]

1  This is printed in the Annex to this Report. The Committee is also grateful to the Carers National Association for sending it a copy of its Second Reading brief on the bill. Back
2  To set these figures in context, in each session in the ten years to 1996-97 an average of 185 instruments were laid before Parliament under the affirmative procedure and 1,127 under the negative procedure (House of Commons Hansard 10 June 1998, written answers col. 557). Back
3  The purposes and objectives are expected to vary considerably between PCTs. Back
4  Paragraph 52. Back
5  Department's memorandum, paragraphs 51 and 53. Back
6  Clause 24(1). Back
7  Paragraph 102. Back
8  Department's memorandum, paragraph 102. Back
9  Explanatory notes, paragraph 196. Back
10  Explanatory notes, paragraph 196. Back
11  Memorandum, paragraph 133. Back
12  Memorandum, paragraph 137. Back
13  Explanatory notes, paragraph 259. Back
14  Explanatory notes, paragraph 254. Back
15  Department's memorandum, paragraph 138. Back
16  Paragraph 91. Back
17  This report is also published on the Internet at the House of Lords Select Committees Home Page (http:/, where further information about the work of the Committee is also available. Back

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