House of Lords - Merits of Statutory Instruments

Select Committee on Merits of Statutory Instruments Eleventh Report

Eleventh Report

Instruments drawn to the special attention of the house

The Committee has considered the following instruments and has determined that the special attention of the House should be drawn to them on the ground specified.

Northern Rock plc Transfer Order 2008 (SI 2008/432)

Draft Northern Rock plc Compensation Scheme Order 2008

Summary: HM Treasury have laid these orders under the Banking (Special Provisions) Act 2008. That Act relates to "authorised UK deposit-takers" in general but these instruments specifically bring Northern Rock plc into temporary public ownership and enable the amount of any compensation payable by the Government as a result of the transfer order to be determined by an independent valuer. In accepting a recommendation of the Delegated Powers Committee, the Government agreed that compensation orders under section 5 of the Act should be subject to affirmative resolution. The House will thus have the opportunity to debate the draft Northern Rock plc Compensation Scheme Order 2008. The Government did not however accept the Committee's recommendation that transfer orders under section 3 of the Act should also be subject to affirmative resolution, with the result that, even if the House voted to annul the current transfer order, the transfer of property already effected would not be reversed by that annulment. The Government's decision means that any future exercise of the transfer powers in the Act will, due to the negative procedure, not be subject to automatic debate, nor will Parliament be able to reverse the transfer by annulling any future instrument.

The Northern Rock plc Transfer Order 2008 (SI 2008/432) and the draft Northern Rock plc Compensation Scheme Order 2008 are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.

1. HM Treasury (HMT) have made the Northern Rock plc Transfer Order 2008 ("the Transfer Order") under sections 3, 4, 12 and 13(2) of the Banking (Special Provisions) Act 2008 ("the 2008 Act"). An Explanatory Memorandum (EM) and Impact Assessment (IA) have been provided.

2. HMT have laid the draft Northern Rock plc Compensation Scheme Order 2008 ("the Compensation Scheme Order") under sections 5, 9, 12 and 13(2) of the 2008 Act. An EM and IA have been provided.

3. The House spent two days last week debating the Banking (Special Provisions) Bill during its rapid passage to the statute book. The powers in that Act are general powers relating to "authorised UK deposit-takers". The Transfer Order which we here draw to the special attention of the House is the instrument which brings Northern Rock plc into temporary public ownership. The Transfer Order was made and laid on 21 February, the day on which the 2008 Act received Royal Assent, and brought into force on 22 February. The EM states that "it is in everyone's interest for the transfer of shares [in Northern Rock to the Treasury Solicitor] to be effected as swiftly as possible to avoid any further uncertainty ..."

4. The Compensation Scheme Order enables the amount of any compensation payable by HMT as a result of the Transfer Order to be determined by an independent valuer. The valuer's determination may be reviewed by the Financial Services and Markets Tribunal. The draft Compensation Scheme Order was laid on 22 February and is subject to approval by both Houses.

5. The Government's decision to bring Northern Rock into public ownership has been the subject of detailed parliamentary consideration over the last week, during the passage of the 2008 Act. We do not wish to re-open the arguments for and against that decision, but the laying of these Orders gives us cause to refer to an issue which was addressed by the Delegated Powers and Regulatory Reform Committee (DPRRC) in its Report on the bill[1].

6. In their Report, the DPRRC expressed concern about the negative procedure which applied to the powers in clause 3 of the Bill to make a transfer order, and also to other powers in clauses 3 to 7. The Committee commented: "We disagree with the Treasury's reasoning as to certainty and speed in favour of the negative procedure for the powers in clauses 3 to 7 and set out our reasons below. In any event, the scope and significance of each of these powers is such that Parliament should have the opportunity to debate each exercise on a Minister's motion: the negative procedure is inappropriate and we recommend that each of the powers in clauses 3 to 7 should be subject to the affirmative procedure." This was because "even if one or both Houses voted to annul an order under clauses 3, 4 or 6 of this bill, a transfer of property already effected by the order would not be reversed by that annulment ... If Parliament wishes to have control over the exercise of the transfer powers in clauses 3, 4 and 6, the draft affirmative procedure is the only appropriate procedure: any other is ineffective."

7. The Government did not accept this recommendation as regards clause 3: a position fully tested in the House at Report stage[2]. In their memorandum to the DPRRC, the Government considered that a requirement for each House to approve a draft order would cause delay and uncertainty, particularly where Parliament was in recess. The Transfer Order is subject to the negative resolution procedure and came into force the day after it was made.

8. The Government did however table amendments, passed by the House, to amend the Bill to reflect the Delegated Powers Committee's recommendation in relation to clause 5, that compensation scheme orders should be subject to affirmative resolution. The House will thus have the opportunity to debate the draft Northern Rock plc Compensation Scheme Order 2008.

9. The House is unlikely to want to annul the Northern Rock plc Transfer Order 2008: the House would not have passed the Banking (Special Provisions) Bill if it wished to prevent the Government from implementing its declared intention to use the powers therein to bring Northern Rock into temporary public ownership. But we note that future exercises of the transfer powers in the Banking (Special Provisions) Act 2008 will, due to the negative procedure, not be subject to automatic debate, nor will Parliament be able to reverse the transfer by annulling any future instrument.

Other instrument of interest

STATEMENT OF CHANGES IN IMMIGRATION RULES (HC 321)

10. The Home Office have laid a Statement of Changes in Immigration Rules (HC 321) which begins the implementation the Points-based System for immigration. This instrument brings in the first phase which applies to Highly Skilled Migrants (Tier 1 (General Route)) and sets out the detail of how the 75 points which may qualify the applicant for admission may be accumulated according to the applicant's qualifications, age and previous earnings. Over the next 18 months further instruments will be issued to bring the system in for the rest of Tier 1(mainly entrepreneurs) and lower skilled workers, students and temporary workers (Tiers 2-5).

11. As announced in a written statement[3] this instrument also:

sets new grounds for the automatic refusal of any immigration application, if the applicant has sought to enter the country by deception or has previously breached immigration rules. The length of ban is determined by how the person left the UK i.e. whether voluntarily or not and whether at public or private expense;
imposes a general restriction preventing applicants from taking up a post as a doctor in training. This is explained as a short-term measure while the demand for training places from those who received their initial medical training in the UK exceeds the supply of available places; and
applies powers under section 50(2) of the Immigration Asylum and Nationality Act 2006 which allow any new or revised application forms to be specified administratively (generally by means of the website of the Border and Immigration Agency of the Home Office). Previously such forms were made by regulation and therefore were subject to Parliamentary scrutiny.

Instruments not drawn to the special attention of the house

The Committee has considered the instruments set out below and has determined that the special attention of the House need not be drawn to them.

Draft Instruments requiring affirmative approval

Charities Act 2006 (Charitable Companies Audit and Group Accounts Provisions) Order 2008

Occupational Pension Schemes (Levy Ceiling) Order 2008

Tax Credits Up-rating Regulations 2008

1 Fifth Report, HL Paper 58. Back

2 HL Deb 21 February 2008 col 361-368 Back

3 HL Deb 6 February 2008 col WS 92-94 Back