House of Lords - Delegated Powers and Deregulation

Select Committee on Delegated Powers and Deregulation Thirty-Seventh Report

SPECIAL REPORT FOR 1999-2000 - THE COMMITTEE'S WORK

USE OF COMMONS-ONLY PROCEDURE FOR ORDER-MAKING POWERS

58. A comparatively small number of statutory instruments are laid before the House of Commons only. In all but one of the instances where we have considered an order-making power of this type in the eight sessions of this Committee's existence, we have seen this as entirely appropriate. In our consideration of the Transport Bill this session, however, we were uneasy about the use of Commons-only procedure.

59. There were six powers in the Transport Bill (as brought to the House of Lords) which were subject to affirmative resolution in the House of Commons. These were in clause 170, Schedule 12, paragraphs 9(1) and 13(2) and (5) and Schedule 14, paragraphs 8 and 14. Some of these powers were uncontroversial, but clause 170(5) allowed the making of regulations amending the clause for the purpose of adding, removing or varying cases where, for the purposes of Part III, workplace parking places were provided. In addition, there were three powers in Schedule 12 which were also subject to clause 170(5) and so regulations under them could not be made by the Secretary of State unless a draft had been approved by the House of Commons. Schedule 12 was concerned with the financial aspects of road user charging and workplace parking levy. Regulations under paragraph 9(1) were concerned with the application of a non-metropolitan local traffic authority's share of the net proceeds of a charging or licensing scheme.

60. These charges related essentially to local taxation. Even with the help of Erskine May, the Committee agreed that the boundary line between where local charges did or did not need ways and means resolutions was not an easy one to draw. The Committee concluded that it had some uncertainty about the appropriateness of the Commons-only procedure for these order-making powers. It agreed that its report should draw attention to this point.

61. The standard handbook on statutory instruments procedure is Statutory Instrument Practice. This gives almost no guidance as to when Commons-only procedure is appropriate for a statutory instrument. We understand that the practice has been that a statutory instrument is made subject to Commons-only procedure if it deals with a matter which, if dealt with in primary legislation, would attract a claim of privilege by the Commons. We consider that to be an entirely logical and comprehensible approach, and recommend that guidance to this effect should be included in the next edition of Statutory Instrument Practice.

EUROPEAN CONVENTION ON HUMAN RIGHTS

62. In our last special report we commented as follows:

"There is as yet no Joint or House of Lords Select Committee on Human Rights. An announcement was made in the House of Commons on 14 December 1998 that a Joint Committee would be set up "before the Human Rights Act 1998 comes fully into force so that it will have time to prepare its work" (col. 604). Pending the appointment of any parliamentary Human Rights Committee, during the present session we have taken care to comment on those proposals for delegated legislative powers which appeared to us to raise issues connected with the Convention."

63. As the Joint Committee has still not been set up, this session we have continued to comment on those proposals for delegated legislative powers which in our view raised issues connected with the Convention. We did so, for example, in our reports on the Financial Services and Markets Bill,[46] the Terrorism Bill[47] and the Regulation of Investigatory Powers Bill.[48]

COMPATIBILITY OF SECONDARY LEGISLATION WITH THE ECHR

64. In the Committee's Report on the Immigration and Asylum Bill (22nd Report, Session 1998-99) we suggested that when a draft instrument under the bill came before the House for approval the minister moving the resolution should inform the House whether he is satisfied that the instrument is compatible with Convention rights. Lord Williams of Mostyn gave an undertaking to this effect during the passage of the bill[49] and the Government has since extended that undertaking to cover all resolutions approving affirmative instruments and any secondary legislation to the extent that it amends primary legislation. In the latter case if the instrument is not subject to affirmative procedure the statement of compatibility would be in writing, perhaps in the form of a letter to the Joint Committee on Statutory Instruments. The full text of the undertaking is set out in Annex 2 to this report.

65. We attach great importance to this undertaking. It is a significant commitment by the Government. Lord Williams' undertaking has indeed borne fruit in that the Joint Committee on Statutory Instruments now receives such statements of compatibility with the Convention rights. In some cases the undertaking can strengthen the case for the affirmative resolution procedure. We emphasised this in our report on the Child Support, Pensions and Social Security Bill, for example, where we commented in the following terms about provisions which allowed the breach of a community service order or a probation order to be punished by loss of benefit:

CASE STUDY FOUR: THE FUR FARMING (PROHIBITION) BILL

66. We reported on this bill in our 26th report of this session. Clause 5 of the bill provides for the making of a compensation scheme for existing businesses. The scheme to be made by the Minister is to be made by order subject to negative procedure. Our understanding of the clause was that it gave the Minister a discretion whether or not to compensate loss of "income" and that he had not decided whether to do so. We considered that the question of whether or not compensation should include loss of "income", which had important Human Rights implications, should not be left to ministerial discretion. We therefore recommended the amendment of clause 5 to make the Government's intentions clear.

67. The Ministry of Agriculture, Fisheries and Food subsequently confirmed, in a letter published in Annex 3 to our 30th report,[51] that ministers had decided that an amendment should be put forward at Lords' Committee stage to commit the Ministry to include loss of "income" in the compensation scheme. The Committee welcomed this response to our recommendation, which was agreed to by the Grand Committee on 17 October.[52]

SOME PROCEDURAL CONSEQUENCES OF DEVOLUTION

68. In our written evidence last year to the Royal Commission on House of Lords Reform we said that "we strongly believe that the need to establish a mechanism for maintaining relations between the House of Lords and the Scottish Parliament and devolved Assemblies is such that it cannot be postponed until the Royal Commission has reported. Indeed, we consider that, just as the House of Commons is currently considering the procedural consequences of devolution, the House of Lords should also be addressing this issue now, separately from House of Lords reform. The issue is all the more pressing for the House of Lords as, unlike the House of Commons, the House of Lords has no obvious first-port-of-call for relations with the Parliament and Assemblies. In our view the House of Lords should consider this issue as a matter of high priority."

69. At our fifth meeting this session, on 26 January 2000, we noted that all our suggestions had been taken up by the Commission, apart from on devolution, where paragraphs 6.22-6.25 of the Royal Commission's report outlined a number of questions raised by devolution which had been left unresolved, and suggested the possible establishment of a "Devolution" Committee.

70. Whilst the House of Lords has yet to address this issue, this session we have considered large numbers of powers which have been delegated to the Welsh Assembly.[53] Following our preliminary discussion of the Transport Bill at our meeting on 7 June we noted that in this bill (and others) the powers which were delegated to the Welsh Assembly were scattered throughout the bill, and it was therefore difficult to keep track of them. We therefore asked the Department for a note of the powers which were proposed to be delegated to the Welsh Assembly, which we appended to our report.[54] We commend this practice to other Departments writing memoranda on bills containing large numbers of powers delegated to the Welsh Assembly.

71. Our reports are of necessity published some time after the relevant bill has been introduced in the House of Lords. To facilitate the wider scrutiny of powers delegated to the Welsh Assembly we further recommend that the explanatory notes which are now printed with each bill should include a note on the powers delegated to the Welsh Assembly.

72. We have little direct information about the Scottish Parliament or Welsh Assembly considering delegated powers at a similar time to our own consideration. In our first report on the Regulation of Investigatory Powers Bill, however, we noted that the Scottish Parliament's Subordinate Legislation Committee had considered the delegated powers provisions in the Regulation of Investigatory Powers (Scotland) Bill at its meeting on 6 June. The Clerk had been asked to provide information for that meeting, at which witnesses from the Scottish Executive had apparently said in an opening statement that the Executive would propose several amendments to the Scottish Bill. These appeared to address the concerns which we had expressed in connection with the Regulation of Investigatory Powers Bill.[55]

GOVERNMENT REPLIES TO THE COMMITTEE'S REPORTS

73. In our Special Report for Session 1997-98 we welcomed the practice of some Government Departments of responding in writing to the Committee's recommendations, and invited the Liaison Committee to consider whether all Departments should, in future, respond succinctly in writing to those recommendations from the Committee for which they were responsible. We considered that it could assist the House's deliberations if such letters were routinely made available to front-bench spokesmen on the bill in question, and placed in the Library of the House.

74. In its 1st report of last session, which was agreed to by the House on 22 April 1999, the Liaison Committee endorsed this recommendation, including the proposal that copies of responses should be provided to front-bench spokesmen and placed in the Library of the House. The Liaison Committee noted: "Whereas responses to reports from other committees are expected to be produced within two months (or six months in the case of the Science and Technology Committee), it would not be appropriate to lay down a time limit for such responses. They need to be made in good time for amendments to be tabled to the bill in question. In some cases that will require Departments to act within a few days, and we recognise that occasionally the timetable for the passage of a bill may make the provision of a written response impracticable."

75. Our experience this session has been that the practice of providing Government responses to our recommendations has not yet bedded down. Clearly only those reports which contain substantive recommendations for change require responses, but even so, the total of formal Government responses received has been disappointingly small.[56] We believe that when Government responses are provided in good time before the next stage of the bill this can assist the House considerably, and may well save time in debate. We therefore encourage Departments to provide written responses to our recommendations in good time for them to be considered by the House.

76. It is clearly in the interests of the House to know the Government's response to the Committee's recommendations as soon as possible. A written response seems to us the ideal solution, as then Opposition or back-bench members can decide whether or not to table amendments themselves in good time. The alternative practice of only placing a letter containing the Government's response in the Library would have little effect, since back-bench members would not know it was there.[57] At our meeting on 28 June[58] we discussed another alternative - the possibility of the Minister communicating the Government's response to our recommendations at the beginning of the relevant stage on the floor of the House. Under current House of Lords procedures it is not possible to do this, as speeches take place on amendments, and although one Minister followed this course on one occasion during the 1998-99 session this was not thought to be procedurally desirable. We recommend that the Procedure Committee should consider the preferred format for Government responses to our recommendations, given that it is in the interests of the House as a whole that these should be delivered in a timely manner.

77. What we do not do - however tempting at times it may be to do so - is to offer further comments, unless these are specifically invited or it seems to us that a Government response, coupled with our own silence, might inadvertently mislead the House. Our role is to serve the House by providing advice to it, and that advice is almost always taken.

COMMENCEMENT POWERS

CASE STUDY FIVE: THE ELECTRONIC COMMUNICATIONS BILL

78. Most commencement powers are uncontroversial. But this was not the case with the Electronic Communications Bill of this session. This bill was the subject of pre-legislative scrutiny by the Trade and Industry Committee of the House of Commons.[59] That Committee was concerned that Parliament should be able to review any decision to bring into force Part I of the bill. Part I was unusual because it was presented to Parliament on the basis that it would be needed only if self-regulation in the industry is seen to fail. The unusual commencement provision in clause 15 repealed Part I at the end of five years from Royal Assent unless an order had been made bringing Part I into force (though the order could specify a commencement date after the end of the five year period).

79. What concerned the Trade and Industry Committee was that the Government's decision that self-regulation had failed could not be effectively challenged in Parliament. Once a commencement order had been made, the process was irreversible - Part I took effect and regulations under it would be needed and the bill provides only negative procedure for those. Their report commented that they would await with interest this Committee's report on these provisions.[60] The Government was challenged on this at Committee Stage in the Commons but did not give way.

80. This Committee invited oral evidence from officials of the Department of Trade and Industry. This evidence is an excellent example of how half an hour's targeted questioning of officials in Committee can provide solutions which are less easy to achieve, and would almost certainly take longer, on the floor of the House. As a result of this questioning the recommendations in the Committee's 5th report included the following recommendation about the commencement power:

81. The Committee's recommendations were subsequently accepted by the Government and the bill was amended accordingly.

SUNSET PROVISIONS IN BILLS

82. "Sunsetting" is a process in which new regulations are given automatic expiry dates unless re-made through normal rule-making processes. This ensures continuing review and updating of regulations, and is intended to guard against obsolescence. Sunset clauses are widespread in Australian legislation, usually with an expiry date of seven to 10 years.[62]

83. Sunset provisions are not the only weapon for regulatory reform and indeed in Australia, where regulations have been reviewed more often and more thoroughly than in any other OECD country,[63] they are used alongside other reform mechanisms including staged repeal or automatic revocation processes to review existing regulations, ad hoc reviews and review clauses built into new regulations.[64]

84. Although the Australian sunset provisions are on regulations, the same mechanism could be applied to primary legislation. One attraction of sunset provisions is that they avoid the need for recourse to the very wide Henry VIII powers found in both the Deregulation and Contracting Out Act 1994 and the Draft Regulatory Reform Bill of this session. Indeed, this Committee's report on the Deregulation and Contracting Out Bill recommended that that bill should be amended to provide for a three year sunset provision, renewable by a resolution of each House of Parliament for further periods each not exceeding three years, but this recommendation was not accepted at the time.[65]

85. This session the Government demonstrated its willingness to accept a sunset provision in the Football (Disorder) Bill.[66] The Liberal Democrat MP Dr Vincent Cable has suggested that sunset clauses should apply to all EU Directives and Regulations.[67] For the Conservatives, Angela Browning MP, the shadow trade and industry secretary, has made the following statement:

CASE STUDY SIX: THE FOOTBALL (DISORDER) BILL - A SUNSET PROVISION

86. In our report this session on the Football (Disorder) Bill we made three recommendations for the enhancement of the degree of parliamentary control of the delegated powers in the bill. All these recommendations were accepted by the Government.[69] In this Special report we wish to draw attention to the sunset provision in the bill.

87. Clause 5 of the bill contained a simple commencement power in subsection (1) (as usual, no Parliamentary control was provided). But unusually the clause also provided that the new powers were to continue in force only for a year (subsections (2) and (3)) unless extended (for up to a total of four years) by order under subsection (4). Thus five years after the new powers were brought into force they would cease to be exercisable and it would take a new bill to restore them. An order extending the life of the new powers was subject to affirmative procedure (clause 3(4)).

88. We considered this to be an acceptable delegated power, especially since subsection (5) provided that before making an order under subsection (4) the Secretary of State must lay a report about the working of the Act before each House of Parliament. The report concluded that "it is for the House as a whole to determine whether the "sunset" provision should not take effect until the end of five years."[70]

THE EFFECT AND VALUE OF PRE-LEGISLATIVE SCRUTINY

THE EFFECT AND VALUE OF PRE-LEGISLATIVE SCRUTINY

89. One of the functions of this Committee is to report on the delegated powers of any draft bills which are referred to it. During the 1998-99 session we reported on our pre-legislative scrutiny of three draft bills. We also reported twice on the proposed reform of the Deregulation and Contracting Out Act 1994. This session we have reported on only one draft bill.[71] The arrangements for pre-legislative scrutiny of draft bills flowed from recommendations made by the Select Committee on Modernisation of the House of Commons in its First Report, on the Legislative Process, in July 1997.[72] Several departmentally-related Commons committees, and one ad hoc Commons committee,[73] have reported on draft bills.

90. In view of the current interest in pre-legislative scrutiny we think it may be helpful to say something about our experience last session. Two draft bills were considered by Joint Committees last session, and one by separate select committees of the two Houses. The three draft bills concerned were as follows:

The draft Financial Services and Markets Bill;
The draft Local Government (Organisation and Standards) Bill. This was referred to an ad hoc joint committee of 8 peers and 8 MPs, which reported on 27 July 1999;[74]
The draft Freedom of Information Bill. This was referred to an ad hoc Lords select committee of 11 members which reported on 27 July 1999.[75] The same draft bill was simultaneously considered by the House of Commons Public Administration Committee.

91. When reporting the results of ad hoc pre-legislative scrutiny Committees have commented on the mechanics of the procedure in which they were involved, including the tight time constraints under which they worked and, in the case of the Lords-only Committee on the draft Freedom of Information Bill, the desirability of operating by Joint Committees in future. Although each Committee has considered that the procedure was worthwhile, it is inevitably only at a later stage in the parliamentary process that the benefits of the procedure can be evaluated fully. However, the fact that once ad hoc Committees have reported they cease to exist means that these Committees are not able to evaluate the effect of their own work. As a result, there has to date been no systematic evaluation of the pre-legislative scrutiny procedure as it affects the House of Lords.

92. Nevertheless, some general observations on the likely benefits of the procedure may be, and have been, made. As the Lords Committee on the draft Freedom of Information Bill commented:

"This ... pre-legislative scrutiny procedure ... is to be welcomed. It enables Parliament to make its views known to the government, and it enables the government to respond, more effectively than the traditional legislative process. A characteristic of the traditional procedures in modern times is the reluctance of governments of all political complexions to accept amendments to bills once they have been formally introduced into Parliament."

93. Additionally, the Royal Commission on the Reform of the House of Lords observed of pre-legislative scrutiny that "apart from being more likely to produce better legislation, it should also reduce the chance of differences of view between the two chambers at a late stage in Parliamentary proceedings."[76] Our own experiences of pre-legislative scrutiny lead us to echo these observations. In addition, we note that pre-legislative scrutiny, both by ourselves and by other Select Committees, enables Parliament to take evidence either orally or in writing from interested parties. We consider that such evidence can greatly enhance the consideration of bills and draft bills.

CASE STUDY SEVEN: THE FINANCIAL SERVICES AND MARKETS BILL

94. This bill had a lengthy gestation period, and indeed has been the only public bill so far to have been subject to the new procedure whereby public bills may be "carried over" from one session of Parliament to the next, rather than falling at the end of the session.[77] The draft bill underwent particularly detailed pre-legislative scrutiny. Firstly, it was reported on by the Treasury Select Committee in the House of Commons, which heard oral evidence from the then Economic Secretary, Patricia Hewitt MP. Following that evidence the Government accepted several of the points which the Treasury Select Committee had put to Ms Hewitt during its enquiry.[78] More detailed pre-legislative scrutiny of the draft bill was carried out by a Joint Committee of both Houses, chaired by Lord Burns ("the Burns Committee"), constituted to scrutinise the draft bill. The Joint Committee also considered a progress report published by the Treasury in May 1999 in response to its public consultation on the bill. The Burns Committee published its first report in April 1999[79] and its second report in June 1999.[80]

95. The Delegated Powers and Deregulation Committee considered a draft of the bill while it was being considered by the Burns Committee. We made a number of recommendations in our submission to that Committee dated 31 March 1999. The Treasury welcomed and responded to our suggestions in its published response to the Joint Committee in June 1999, when the bill was introduced into Parliament.

96. When the bill arrived in the House of Lords this session it was possible to see how beneficial the pre-legislative scrutiny exercise had been. The Financial Services and Markets Bill was heavily amended in the light of the pre-legislative scrutiny it received. As the Treasury's memorandum to us stated: "many helpful recommendations were made which have helped substantially to improve the Bill in many respects. Further improvements have been made as a result of consideration in Standing Committee and Report Stage during the Bill's passage through the Commons."[81]

97. The most significant feature of the delegated powers in this bill is that the majority are conferred not on Ministers but on the Financial Services Authority and are not subject to any form of Parliamentary control. The Committee considered this fact carefully at the pre-legislative scrutiny stage. We accepted in principle that the delegation of powers to the F.S.A. was appropriate, but only if this delegation were made subject to a number of safeguards. Our comments at the pre-legislative scrutiny stage led to significant changes, including:

an obligation on the F.S.A. to submit an annual report to the Treasury, to be laid before Parliament - the Treasury will have power to ensure that each report covers the use of delegated powers;
the amendment of the bill to require a separation of functions within the F.S.A. between those responsible for bringing any disciplinary proceedings and the body responsible for adjudicating on these proceedings;
the amendment of the bill to make plain that compliance with the F.S.A.'s market abuse code is a "safe harbour" for commercial transactions;
conferring the power to define "private person"[82] on the Treasury (rather than the F.S.A.) and making this power exercisable by statutory instrument.

98. The bill in the form that it reached the House of Lords contained some 400 delegated powers and extended to over 400 clauses and 19 Schedules. We said in our 7th report this session that "we have no doubt that the pre-legislative scrutiny process has added considerable value to the parliamentary examination of this bill".[83] If anything, the subsequent passage of the bill through the House of Lords re-enforced our opinion of the value of pre-legislative scrutiny. 675 amendments[84] were made in the House of Lords to the bill. Only fifteen of these were non-Government amendments - one at Committee stage, five at report and nine at Third Reading.[85] The experience of the Financial Services and Markets Bill would suggest that it is much easier for a Government to concede amendments suggested by pre-legislative scrutiny Committees than it is in the more politically charged atmosphere once a bill has been introduced formally into Parliament.

Table 1: Amendments to the Financial Services and Markets Bill (both Houses of Parliament)

Amendments tabled Amendments made

Government amendments 1,469 1,468

Non-government amendments 1,309 25