Steel Industry (Special Measures) Act 2025
22.The Steel Industry (Special Measures) Bill was brought from the House of Commons on Saturday 12 April and is now enacted, having passed all its parliamentary stages in both Houses and received royal assent on the same day. The Act:
- creates wide-ranging powers for the Secretary of State to make interventions in relation to steel undertakings in England that are at risk of ceasing to be used, whether on a permanent or temporary basis;
- provides for unlimited fines and two years’ imprisonment for non-compliance by steel undertakings (and its directors, managers, partners etc) with directions made under the Act by the Secretary of State;
- allows the Secretary of State to seek a High Court injunction to secure the continued operation of specified assets;
- allows the Secretary of State to make regulations providing for the payment of compensation to steel undertakings.
23.The Department for Business and Trade has provided us with a Delegated Powers Memorandum (“the Memorandum”).3 Because the Bill and the Memorandum were not published until very shortly before the parliamentary debates, there was no time to undertake proper scrutiny in time for those debates. Given the way in which the Bill was fast-tracked through Parliament, and given the importance of the issues involved, we have decided to undertake post-legislative scrutiny.
24.We draw the attention of the House to section 7 of the Act. Section 7(1) provides the Secretary of State with the power to make regulations making provision for paying compensation to a steel undertaking, to which a notice under section 2(1) has been given, as a result of any exercise of the Secretary of State’s functions under the Act.
25.The directions that can be given to a steel undertaking under section 2 are of extraordinary width. They include the power to require the undertaking to do any or all the following:
- use (or not use) assets in a specified way;
- enter agreements, including contracts of employment;
- change personnel;
- manage matters in a particular way;
- pay money to specified persons.
Failure to comply with directions can result in criminal prosecution, unlimited fines and two years’ imprisonment.
26.Moreover, if the Secretary of State considers that a steel undertaking has failed or is failing to comply with any part of a direction, or that there is a risk of so doing, the Secretary of State has powers to:
- enter the premises using force if necessary;
- run the undertaking, make loans, pay salaries;
- prevent the disposal of, or other dealings in respect of, specified assets;
- take whatever steps the Secretary of State considers appropriate for the purposes of securing the continued and safe use of specified assets;
- require any person on the premises, or any other person who has dealings with specified assets or with the steel undertaking, to give whatever assistance the Secretary of State may reasonably require for the purposes of securing the continued and safe use of specified assets.
27.In the light of:
(a)the extraordinary nature of the obligations that can be forced on commercial organisations (under pain of unlimited fines and two years’ imprisonment),
(b)the potential magnitude of the compensation payable, and
(c)the parliamentary and public interest in an Act conferring such wide powers against a commercial organisation,
it is surprising that the compensation scheme in section 7 is subject only to the negative resolution procedure. Section 7 is drafted in the widest terms, leaving everything to regulations with nothing substantive on the face of the Act.
28.The Government’s arguments for the negative procedure are four-fold and are unconvincing:
- The Memorandum (para 22) says that regulations determining compensation under section 7 are likely “most often” to be used to make “technical, administrative and procedural arrangements” for the payment of compensation, which do not warrant taking up large amounts of parliamentary time.
The negative procedure will certainly not take up large amounts of parliamentary time. In practice it will take up no parliamentary time at all. Given the powers that the Government have taken against (inter alia) a major foreign commercial organisation, the terms of the compensation scheme are likely to be of considerable public, parliamentary and international interest. Given the wide powers (supported by the criminal and civil law) that can be exercised against commercial entities acting in good faith and in their commercial interests, the magnitude of the compensation might be considerable and attract public interest. Yet section 7 entails that no debate is required before the compensation scheme becomes law, just as the truncated legislative timetable admitted of virtually no debate on the matter when the Bill was enacted.
- The Memorandum (para 23) says that the power under section 7 is “not of a similar nature to those which are commonly subject to the affirmative procedure”.
We agree. The extraordinary background and context of the events triggering the compensation scheme under section 7 is unlike anything we have seen before. The idea that something so unusual and controversial (preceded by emergency legislation and perhaps involving substantial sums of public money) can be achieved through negative procedure regulations is highly unusual.
- The Memorandum says that the compensation scheme does not provide for the creation of criminal offences and does not involve amending or repealing primary legislation.
We agree. Compensation schemes are designed to compensate and don’t typically involve the creation of criminal offences. The affirmative procedure can be, and often is, used when there are no criminal offences in issue and where primary legislation is not amended. In fact, the context of the section 7 scheme is underpinned by criminal offences, injunctions and other civil remedies. The significance and context of the compensation scheme demanded the use of the affirmative resolution procedure.
- The Memorandum says that the power in section 7 resembles similar powers in other legislation, which have been subject to the negative procedure; for example, the power in the Armed Forces (Pensions and Compensation) Act 2004 to establish compensation schemes for personnel injured in the armed or reserve forces.
The context and significance of the compensation scheme under section 7 is unique and bears no resemblance to the armed forces precedent. There can be few things on which parliamentarians are more likely to agree than the need for fair compensation for wounded service personnel. The context of section 7 is different. It is apt to involve controversial, ongoing and expensive action opposed by steel undertakings, perhaps against the background of criminal prosecutions against directors and others. The size of the compensation might be considerable. As for the mechanism according to which compensation is payable, it does not appear on the face of the Act; everything will depend on regulations.
29.Had sufficient time been allowed to report on the Bill before enactment, we would have recommended that regulations under section 7 be subject to the affirmative resolution procedure.
3 Department for Business and Trade, Memorandum on the Steel Industry (Special Measures) Act 2025 from the Department for Business and Trade to the Delegated Powers and Regulatory Reform Committee (12 April 2025): https://publications.parliament.uk/pa/bills/cbill/59-01/0221/steel_industry_special_measures_dpm_12_april_2025.pdf [accessed 6 May 2025]