Thirty Sixth Report Contents

Instruments of interest

Draft Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023

18.This Order is intended to simplify a system for determining when a firm trading commodity derivatives or emission allowances as an ‘ancillary activity’ needs, or does not need, to be authorised as an investment firm, and reduces associated reporting requirements. The intention is to reduce regulatory obligations on affected firms, which are seeking to manage their risks rather than make trading profits; examples would be power suppliers trading gas or electricity derivatives, or power generators and airlines trading emission allowances.

19.The instrument is part of a wider reform of wholesale markets regulation following Brexit. The Government’s general approach in this programme, and this instrument, is to remove references to the existing regime from legislation, set the broad regulatory intention and provide the Financial Conduct Authority (FCA) with powers to set the technical standards to achieve this intention. The instrument would thus allow the FCA to replace the EU-derived statistical tests for determining whether trading is an ancillary activity with a more ‘principles-based’ approach. The FCA will design the details of the regime in due course and will consult on specific changes.

Draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023

20.This instrument would bring cryptoassets into the regulatory regime for financial promotions. The intention is to promote “responsible innovation” in the area while enhancing consumer protection, in a market that the Explanatory Memorandum (EM) says presents “a significant risk to consumers”. A cryptoasset is defined as a “cryptographically secured digital representation of value or contractual rights that uses some type of Distributed Ledger Technology and can be transferred, stored or traded electronically”.4 Cryptocurrencies, such as bitcoin, are one form of cryptoasset. The changes are part of a “staged approach” to cryptoasset regulation, including an ongoing consultation5 and measures in the Financial Services and Markets Bill.

21.The Order would mean that businesses promoting cryptoassets would ordinarily need to either be authorised by the Financial Conduct Authority (FCA) or have their promotions approved by an authorised person. However, there is an exemption for UK-based businesses on the FCA’s anti-money laundering register, without which the EM states the changes could amount to an effective ban on cryptoasset promotions. The exemption is temporary, but with no end date.

Environment (Local Nature Recovery Strategies) (Procedure) Regulations 2023 (SI 2023/341)

22.This instrument sets out the procedure that needs to be followed for the preparation, publication, and review of local nature recovery strategies (LNRS) in England. LNRS are a new system of “county-scale spatial strategies” that, according to the Department for Environment, Food and Rural Affairs (Defra), will “identify where action for nature will have particular benefit, both for nature itself and for the wider natural environment”. They form part of a package of measures introduced by the Environment Act 2021 to reverse the decline of nature.

23.Defra says that LNRS should work together with other measures such as Environmental Improvement Plans and legally binding targets. The preparation of LNRS will be locally led by a “responsible authority”, such as a local authority or a National Park authority, which will be appointed by the Secretary of State and supported by Natural England. The responsible authority will map the most valuable existing nature areas, agree priorities for recovery and map specific proposals for creating or improving habitat for nature and wider environmental goals. This instrument sets out how LNRS must be prepared in co-operation with other parties and how any disputes should be resolved. Alongside the instrument, Defra has published statutory guidance6 which sets out what LNRS should include.

24.We have received a submission from Wildlife and Countryside Link which raises questions about the Department’s approach and the practical implementation of LNRS. We have published the submission and Defra’s response in full on our website.7

Social Security Additional Payments (First Qualifying Day) Regulations 2023 (SI 2023/361)

25.This instrument specifies 25 February 2023 as the first qualifying day for the initial £301 Cost of Living Payment under the Social Security (Additional Payments) Act 2023 (“the Act”). This date is retrospective as the Act came into force on 23 March 2023; however, the Department for Work and Pensions states that, to avoid fraud, it has always been the policy intention only to announce the qualifying day after it had passed. This payment is part of the package of measures announced in the Government’s Autumn Statement 2022,8 to mitigate the continuing increases in the cost of living for the approximately eight million households receiving the specified means-tested benefits. Eligible households will receive instalments of up to £900 at a total cost to the Exchequer of around £7.5 billion in 2023–24.

Education (Pupil Information and School Performance Information) (England) (Amendment) Regulations 2023 (SI 2023/380)

26.Currently, schools are required to conduct tests on pupils at the end of Key Stage 1 (KS1, the first two years of schooling, covering ages 5 to 7) and to report the results; for example, in the headteacher’s annual report. An instrument laid alongside these Regulations abolishes the requirement for the tests from the 2023–24 academic year,9 and these Regulations remove the associated reporting requirements. The changes reflect a move to testing at the start, rather than the end, of KS1 as the baseline for assessment of progress in primary schools, using the Reception Baseline Assessment (RBA). The RBA became statutory from September 2021 and by 2023–24, all children reaching the end of KS1 will have an RBA.

27.The Explanatory Memorandum (EM) states that KS1 tests will continue to be available, and the Government will “encourage” schools to administer them, but on an optional basis.

28.The change from KS1 tests to RBA was announced in the response to a 2017 consultation.10 The detailed policymaking process since appears to have been thorough and is well described in the EM, for which we commend the Department.

Parole Board (Amendment) Rules 2023 (SI 2023/397)

29.These Rules allow (but do not require) prison and probation staff to give their professional opinion on a prisoner’s suitability for release on parole in their initial reports to the Parole Board. The instrument reverses provisions introduced in 2022 that changed the way written reports are presented to the Parole Board for those convicted of the most serious crimes.11 Under the 2022 system, the Secretary of State could present the Board with a ‘single view’ about the suitability of a prisoner for release, taking account of all written evidence, and staff were prevented from providing their professional opinions directly. However, on 15 March 2023, the High Court ruled that these changes had been applied in a way that prevented staff providing views at any stage of the process, including in response to questions from the Board, and that this was unlawful. These Rules preserve the option for the Secretary of State to present a single view but provide that prison and probation staff may also provide their individual professional opinions.

30.The Rules came into force just four days after making, breaching the convention that a ‘made negative’ statutory instrument should be laid before Parliament for at least 21 days before it comes into force. The Ministry of Justice said this was because the Court ruling meant the previous system was likely to be struck down on 4 April, and that without new Rules there could have been confusion and disruption to parole hearings.

Supported Accommodation (England) Regulations 2023 (SI 2023/416)

31.These Regulations introduce mandatory national standards and Ofsted registration and inspection for providers of supported accommodation for looked after children (LAC) and 16- to 17-year-old care leavers. The measures are intended to raise quality, keep young people safe and allow action to be taken if provision is not meeting the required standards.

32.Supported accommodation is an alternative to fostering or a children’s home if the child is 16 or over and able to live more independently. Examples are group-living arrangements, supported lodgings with a family, or solo living with on-site or visiting support. The Department for Education (DfE) states that supported accommodation has grown rapidly in importance, but currently has very limited oversight. DfE says that the Regulations take a “proportionate approach”; for instance, with registration and inspection at the level of the provider, rather than (as with children’s homes) at each individual address.

33.DfE estimates that the costs of the new regime will ultimately fall on local authorities (LAs) as providers increase their fees to cover increased operating costs. Hence, the Government have provided LAs with £123 million ‘new burdens’ funding over three years. Ofsted will also receive £17 million in additional funding over three years to implement the new regime. The Explanatory Memorandum (EM) reports an extensive consultation process, including specific versions aimed at children and young people, and qualitative research with care-experienced young people. We welcome these steps to improve the policy-making process and the summary of them in the EM.


4 HM Treasury, ‘Cryptoassets Taskforce: final report’ (October 2018): https://www.gov.uk/government/publications/cryptoassets-taskforce [accessed 25 April 2023].

5 HM Treasury, ‘Future financial services regulatory regime for cryptoassets’ (February 2023): https://www.gov.uk/government/consultations/future-financial-services-regulatory-regime-for-cryptoassets [accessed 25 April 2023].

6 Department for Environment, Food and Rural Affairs, ‘Local nature recovery strategy: what to include’, (23 March 2023): https://www.gov.uk/government/publications/local-nature-recovery-strategy-what-to-include [accessed 24 April 2023].

7 Secondary Legislation Scrutiny Committee’s ‘Scrutiny evidence’ webpage: https://committees.parliament.uk/committee/255/secondary-legislation-scrutinycommittee/publications/8/scrutiny-evidence/.

8 HM Treasury, ‘Autumn Statement 2022: Cost of living support factsheet’ (21 November 2022): https://www.gov.uk/government/publications/autumn-statement-2022-cost-of-living-support-factsheet [accessed 24 April 2023].

9 The Education (National Curriculum) (Key Stage 1 Assessment Arrangements) (England) (Amendment) Order 2023 (SI 2023/375).

10 Department for Education, ‘Primary assessment in England: Government consultation response’ (September 2017): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/644871/Primary_assessment_consultation_response.pdf [accessed 25 April 2023].

11 Parole Board (Amendment) Rules 2022 (SI 2022/717), noted as an instrument of interest in 10th Report, Session 2022–23 (HL Paper 56), pp 10–11.




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