59.These draft Regulations propose to replace the definitions of “fundamental rights” and “fundamental freedoms” in the United Kingdom General Data Protection Regulation and the Data Protection Act 2018. Currently, these terms are defined by reference to rights contained in retained EU law. The new references would be to an alternative source of fundamental rights and freedoms under the European Convention on Human Rights, as enshrined in the UK’s Human Rights Act 1998.
60.The instrument was initially laid as a proposed negative instrument for sifting using powers to revoke or replace secondary retained EU law under section 14(1) and (2) of the Retained EU Law (Revocation and Reform) Act 2023. We recommended an upgrade of the instrument to the affirmative procedure in our 53rd Report of Session 2022–2328 because of concerns about a potential reduction in rights protection.
61.The Department for Science, Innovation and Technology (DSIT) stated that the impact on organisations and individuals as a result of the proposed changes was expected “to be minimal”, and that the changes would replicate the current position “as far as possible”, but it was unable to rule out entirely potential differences in the rights and freedoms. We concluded that while DSIT had not identified any discernible impact, any changes in this sensitive area could be regarded as politically significant and something on which the House may wish to seek assurance from the Minister.
62.The Equality Act 2010 (‘the 2010 Act’) is currently interpreted in accordance with subsequent retained EU case law. To prevent those principles disappearing at the end of 2023 as a result of the Retained EU Law (Revocation and Reform) Act 2023, these Regulations amend the 2010 Act to incorporate provisions relating to:
63.The Cabinet Office states that the amendments in this instrument serve to reproduce the effects of retained EU law and do not change current policy.
64.This Order would update the exemptions to the financial promotions regime that allow promotions for unlisted companies to be made to ‘high net worth individuals’ and ‘self-certified sophisticated investors’. HM Treasury (HMT) states that the exemptions were last substantively updated in 2005, since when there have been “significant economic, social and technological changes” and concerns about the misuse of exemptions. HMT says that the modifications do not impose any new burdens on businesses. The proposed changes include:
65.Given high current inflation rates (prices have already risen nearly 5% since the January 2023 data used to reset the thresholds in this instrument), we asked HMT when it next plans to review the thresholds. HMT said that it will keep them “under review”, but that it “does not have plans to reset the thresholds to a specific timeframe”. We encourage HMT to reassess the thresholds on a more timely basis than this revision.
66.These Regulations would make amendments to two parts of Retained EU Law (REUL) in the area of financial services regulation. In each case, REUL is operating while UK-specific regimes are being designed under the ‘Smarter Regulation Framework’.
67.The first change would reintroduce a ‘discount factor’ that acts to reduce the amount of capital small- and medium-sized firms hold for their trading and derivative activities. HM Treasury (HMT) says the discount factor was “unintentionally” removed from the relevant regulation in both the UK and the EU. HMT told us that the factor was removed from UK law in January 2022, and that this was identified as an issue in July 2023. However, HMT also told us that the factor was reinstated by the EU in its own laws in September 2021. It is curious that a mistake was introduced in the UK after it had already been corrected in the EU.29 HMT told us that “the government does not have a policy of mirroring developments in EU law. The government makes decisions about the appropriate regulatory requirements, with the approval of Parliament, or the regulators do so where Parliament has entrusted them with that responsibility”. It is logical that, following Brexit, the Government does not seek to “mirror” changes in EU law. However, keeping up to date with developments in the EU where parallel measures remain part of UK legislation would mean that avoidable errors, such as this, do not occur. HMT also told us that there was no central government function that monitored developments in the EU. Instead, each Department is responsible for reviewing and then amending, assimilating or revoking its own REUL.
68.The second change extends the end of the transitional period for the ‘third country benchmarks’ regime from 31 December 2025 to 31 December 2030. A benchmark is an index used to determine the amount payable under a financial contract or instrument, or to measure the performance of an investment fund. The third country regime ensures that only benchmarks approved in set ways can be used in the UK. However, during the transition period, there are effectively no restrictions on the use of third country benchmarks. HMT said this is because some benchmark administrators may not have incentives to secure approval, and that “losing access to these benchmarks could have serious repercussions given their widespread use by UK firms for a range of business activities”. We asked why, if benchmark regulation is desirable in theory, it is appropriate to have a transitional regime that entirely bypasses it. HMT said that, in practice, there were significant concerns about the third country benchmark regime; for example, the EU has not yet been able to “switch on” its rules in this area. HMT also stated that the risks arising were “small, manageable and temporary” and provided further justifications. These are helpful responses, but the information should have been included in the Explanatory Memorandum, which should provide a balanced discussion of the issues and associated risks.
69.The Trade Union Act 2016 introduced a number of reforms to Britain’s industrial relations framework which included provision that, where union subscriptions are deducted from wages (“check-off”), a public sector organisation must charge a reasonable sum for the service. It also required that workers have the option to pay their subscriptions by other means such as direct debit, which involve no cost to the taxpayer.
70.The Cabinet Office cites research which shows that less than a quarter of such employers are currently charging trade unions, resulting in an estimated cost of £1.63 million per year to the taxpayer. This instrument seeks to implement the legislation as intended and lists 207 public sector organisations in England and Scotland which must make a reasonable charge for check-off services with effect from 9 May 2024.
71.These Regulations amend the requirements in the annual collection of data relating to school capacity, which is used to calculate capital funding for local authorities to provide new school places. The Department for Education (DfE) states that the data collected has not been changed since 2016, and that, in this time, DfE’s data needs have changed; for example, it is seeking to gather more information at school level, rather than overall capacity in a given planning area, and wishes to make better use of online systems.
72.DfE says that key changes relate to capacity for Special Educational Needs (SEN) places. DfE states that it is “aware of evidence showing that the system is facing significant place pressures in respect of pupils with SEN” and that the new approach will enable it to understand and address these issues better.
73.We were pleased that these Regulations were accompanied by a very helpful Explanatory Memorandum that contained a good explanation of the policy change and why it is being made, and, in particular, very good summaries of the consultation process and the impact.
28 53rd Report (Session 2022–23, HL Paper 260).
29 The January 2022 changes to UK law were introduced by a commencement order made in June 2021 (the Financial Services Act 2021 (Commencement No. 1) Regulations 2021 (SI 2021/671)), prior to the EU correction, but the Government could have considered steps to revoke, reverse or otherwise correct the mistake before it came into force, if the EU’s actions had been identified.