Appendix 1: Financial Guidance and Claims Bill [HL]: Government Response
Letter from Baroness Buscombe, Minister for Work and Pensions (Lords) at the Department for Work and Pensions, to Lord Blencathra5, Chairman of the Delegated Powers and Regulatory Reform Committee
I am grateful to the Committee for its careful consideration of the Financial Guidance and Claims Bill and I would like to take this opportunity to respond on the three areas to which the Committee drew attention in its report in order to assist the House with its deliberations on these points.
Clause 1(3)—The name of the body
The power referred to in clause 1(3) allows the Secretary of State to make Regulations to name the body via the negative resolution procedure.
I note that the Committee have concluded that this is an inappropriate delegation of power. The Committee’s rationale was that the norm is for the name of a new public body to be set out on the face of primary legislation and that the Department has not demonstrated that there are sufficiently strong reasons to depart from this norm.
I remain concerned that naming the body on the face of the Bill would allow domain names to be acquired, imposter websites to be set up and fraudsters to otherwise impersonate the body before it is even set-up, and this would present a genuine risk that members of the public could be deceived, as well as cause damage to the body’s brand. Importantly, I note that the creation of imposter websites was a significant issue when HMT was preparing for, and launching, the Pension Wise guidance service. I am keen to minimise this risk to members of the public in respect of the new body and I consider that this is best achieved by deferring the naming of the body.
For a period of time after the Bill would receive Royal Assent, the Money Advice Service, the Pensions Advisory Service and Pension Wise will all continue their work and I am also concerned that naming the new body on the face of the Bill could cause confusion in the public’s mind by, for example, giving the impression that the new body had started to operate and the existing services had ceased before this was the case and leaving members of the public unclear as to where to seek guidance. I am concerned that this could exacerbate the risk posed by imposter websites and companies who could seek to take advantage of any such confusion.
I also note that there is precedent for the proposed approach. For example, this approach was used in section 75(2) of the Pensions Act 2008 in respect of NEST.
It is noteworthy that the Money Advice Service does not use the name used on the face of its enabling legislation, which is the consumer financial education body. My view is that it is better to allow the single financial guidance body to be named nearer to the time when it starts to operate. This will give the Chair, Chief Executive and the other members of the body the opportunity to be involved in the naming of the body, which should ensure that it then uses the same name when dealing with the public.
This approach will also give both Houses of Parliament an opportunity to scrutinise the name which the body will actually use when dealing with the public.
Clause 5—Guidance from the Secretary of State
In your consideration of powers under clause 5, you draw the House’s attention to the power to issue guidance and conclude that the guidance issued under clause 5 should be subject to parliamentary scrutiny, with the negative procedure providing the appropriate level of oversight.
In your report you considered that guidance given by the Secretary of State under clause 5 would, in effect, be mandatory because the body would be expected to follow it. I note, however, that clause 5 enables the Secretary of State to issue both directions, which must be published and which the single financial guidance body must comply with, and guidance, to which it must only have regard. In this context, I consider that clause 5 makes a clear distinction between directions, which the body will have to follow and for which the Secretary of State shall be accountable, and which therefore must be published, thereby ensuring transparency, and guidance, which is non-binding and where the body may make its own decision for which it will be accountable.
You may be reassured to know that it is Government policy that guidance should not be used to circumvent the usual way of regulating a matter. If the policy is to create rules that must be followed, the Government accepts that this should be achieved using regulations subject to parliamentary scrutiny and not guidance.
I would also like to note that guidance is, in practice, likely to be informal and to include, for example, matters such as responses to queries received from the single financial guidance body, guidance to assist the body in how to interpret government policy and legislation, as well as guidance to help promote best practice. It is therefore highly likely to be dealt with at official level. There is no intention of setting out a whole guidance framework, which would be contrary to the purpose of establishing the single financial guidance body as an arm’s length, non-departmental public body with operational independence.
There are many examples on the statute book of guidance powers which are not subject to Parliamentary scrutiny. A couple of recent examples include section 2E of the Academies Act 2010 (guidance to Academies) which was inserted by the Children and Social Work Act 2017, section 16K of the Children Act 2004 (guidance re safeguarding), also inserted by the 2017 Act, and various sections of the Anti-social Behaviour, Crime and Policing Act 2014 (guidance to chief police officers, e.g. sections 32 and 41).
I consider that a requirement to subject guidance in this context to Parliamentary scrutiny would represent a degree of oversight which would be unwarranted given its non-binding nature. As the guidance is also likely to frequently be provided in response to queries received from the body itself, given at official-level and often may be time sensitive, I also consider this requirement would be impractical and would be a time consuming and overly burdensome use of Parliamentary time, with the risk that helpful guidance desired by the body could not be given or given within the required time frame. I hope that this will assist the House to understand the nature of the power that we propose.
Clause 14—Power to dissolve the new body and transfer its functions to any other person
You have also drawn attention to clause 14 which allows the Secretary of State, by affirmative-procedure regulations, to abolish the body and transfer its functions to any other person.
The Bill does not provide for a fixed lifetime for the single financial guidance body. However, should it ever be necessary to dissolve the body, Parliament will have an opportunity to debate any regulations made using these powers as they will be subject to the affirmative procedure.
This clause was debated at day three of Committee on Monday 11 September. In light of the Committee’s comments on this clause and the strength of feeling in the House, I will consider further whether there is anything more that we can do to meet the concerns that have been raised.
I will place a copy of this letter in the House libraries.
12 September 2017
5 Lord Blencathra was appointed Chairman of the Delegated Powers and Regulatory Reform Committee on 7 September 2017, in place of Baroness Fookes.