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Sixth Report Contents

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Instruments of interest

Draft Civil Liability (Information Requirements) and Risk Transformation (Amendment) Regulations 2020

22.The key change made by this instrument is the introduction of a new reporting requirement for the motor insurance industry in relation to whiplash injuries. HM Treasury (HMT) explains that the Civil Liability Act 2018 (“the Act”) reformed the compensation system for whiplash injuries and changed the way the Personal Injury Discount Rate is calculated. While the reforms are expected to generate savings for insurers, HMT says that Parliament expressed concerns during the passage of the Act that these savings would not be passed onto consumers. Parliament therefore requested amendments to require the Government to report to Parliament about whether any cost benefits have been realised; and whether and to what extent insurers have passed on savings from the reforms in the Act to consumers. This instrument requires private motor insurance providers to submit a one-off data return to the Financial Conduct Authority by 1 October 2023, showing how their costs and premiums have changed as a result of the reforms over a three-year reporting period (financial years 2020-21 to 2022–23). Insurers will also have to produce counterfactual figures showing costs and premiums for the same period if the Act had not been passed. HMT will evaluate the data and report to Parliament before 31 March 2025. HMT expects that between 70 and 80 insurers which have sold 100,000 or more motor insurance policies will be subject to the new reporting requirement, with total one-off costs of £4.7 million (best estimate) for the sector. Small or specialised insurers and insurers which only offer policies for commercial vehicles will be exempt. The Committee notes that by the time HMT will report to Parliament, seven years will have passed since the Act received Royal Assent. A tighter reporting timeframe would have been preferable as the issues may no longer be as pertinent then.

Draft Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) (Amendment) Regulations 2020

23.The purpose of this instrument is to extend until 1 April 2021 the grace period for letting agents before they have to hold client money in a client money account. The Ministry of Housing, Communities and Local Government (MHCLG) explains that since 1 April 2019 lettings agents in the private rented sector holding client money have been required to be members of a Client Money Protection scheme, with the aim of giving landlords and tenants confidence that their money is safe. One of the scheme membership requirements for agents is to have an appropriate client account in place. According to MHCLG, an initial grace period of one year until 1 April 2020 was introduced for this requirement to address concerns that some agents may face difficulties in securing pooled client accounts where the money they hold for a number of clients is placed in a single account. The Department says that such accounts potentially present a money laundering risk because it can be difficult to identify the true owners of the funds in the account, and that some banks have been reluctant to offer such accounts to lettings agents because of concerns about compliance with Money Laundering Regulations as well as commercial factors. MHCLG explains that the Joint Money Laundering Steering Group (JMLSG)28 is currently updating its guidance to help banks understand better the low risk letting agents present. The Department says that it expected the final guidance to be published before 1 April 2020, but that due to unforeseen complexity, the JMLSG is now expected to consult on the draft guidance in the Spring, with the final guidance to be published within the one-year extension period proposed by this instrument. The Department told the Committee that, as of 31 December 2019, 9,978 letting agents, holding just under £3.4 billion in funds, had obtained membership of an approved client money protection scheme, of which all had an appropriate client account or were making “every reasonable attempt to obtain one”. At the same time, 251 letting agents had reported difficulties in obtaining an account during the period of October to December 2019. MHCLG said that this amounted to 2.5% of protected agents, suggesting that the current scale of the problem was limited. We are publishing the additional information provided by the Department at Appendix 3.

M62 And M606 Motorways (Chain Bar Roundabout) (Car Share Lane) (Revocation) Regulations 2020 (SI 2020/68)

24.This instrument removes the requirement for a car share lane from a West Yorkshire roundabout. The Committee was concerned that, although this revocation will speed up traffic it may do so at the expense of increased pollution. Further information from the Department for Transport is provided in Appendix 4.

Communications (Television Licensing) (Amendment) Regulations 2020 (SI 2020/80)

25.This instrument, part of an agreed five-year settlement which runs to 2022, provides for the annual increase of the TV licence fee, from £154.50 in 2019–20 to £157.50 in 2020–21 for a colour licence, and from £52.00 to £53.00 for a black and white licence. The increases are in line with inflation (Consumer Price Index). The instrument also increases the amounts payable if the licence fee is paid in instalments. From 1 June 2020 onwards, only those aged 75 and over and in receipt of Pension Credit will be eligible for a free TV Licence. The Department for Digital, Culture, Media and Sport told the Committee that this change is not part of this instrument and will not require further legislation, but that it was made in June 2019 through a Determination29 by the BBC under the Communications Act 2003, as amended by the Digital Economy Act 2017.

School and Early Years Finance (England) Regulations 2020 (SI 2020/83)

26.This instrument provides for the way in which local authorities are to set their education budgets in the 2020-21 financial year. The Department for Education (DfE) explains that regulations to this effect are made annually and that, to a large degree, this instrument makes the same provisions as the previous instrument30 did for the 2019–20 financial year. However, the Regulations introduce some changes, including in relation to the way in which local authorities distribute the school funding element of their Dedicated Schools Grant (DSG). DSG consists of four funding elements: mainstream schools; central school services; high needs (that is services for children and young people (aged 0-25) with complex needs); and early years. DfE explains that the National Funding Formulae (NFF) determine local authority DSG allocations, and that in 2020-21, local authorities will continue to determine schools’ budget allocations at a local level, through a local funding formula, known as a ‘soft’ schools NFF. The Department plans to implement a ‘hard’ schools NFF in future, whereby schools receive what they attract through the national formula, rather than through different local authority funding formulae. DfE says that the changes made by this instrument mainly relate to making the distribution of school funding by local authorities mirror more closely the distribution of the NFF at school-level, including by making the minimum per pupil levels within the NFF mandatory for local authorities to use, as a step towards the ‘hard’ schools NFF. According to DfE, minimum per pupil funding levels ensure that the funding formula provides every school with a minimum level of funding, benefitting the lowest funded schools, in addition to funding distributed based on the particular characteristics of individual schools and their cohorts. As the Explanatory Memorandum does not put the changes into a financial context, we sought additional information from the Department about the schools budget for 2020–21 and high needs funding which we are publishing at Appendix 5. We have asked the Department to revise the EM to reflect the additional financial information.

Street and Road Works (Amendments Relating to Electronic Communications) (England) Regulations 2020 (SI 2020/122)

27.These Regulations mandate the use of Street Manager, a new digital service developed by the Department of Transport (DfT) which aims to transform the planning, management and communication of street and road works. On the local road network in England, there are around 2.5 million road works each year, leading to traffic congestion that, as well as causing significant disruption to people’s journeys, is estimated to cost the economy around £4 billion per year. The previous planning system, Electronic Transfer of Notifications (EToN), was developed in the 1990s and is no longer fit for purpose, in particular, because each user must purchase its own EToN software licence product from a small and declining market of private sector providers. Responses to consultation preferred Government provision of a single software solution operated on a cost-recovery model, which led DfT to invest £10 million in developing Street Manager. As well as providing better coordination through a centralised system, the new approach is expected to reduce costs to utility companies and local highways authorities. An additional benefit is that the data on live and planned works will be made available so that technology companies can use it in journey planning apps and satnavs.

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