House of Commons - Explanatory Note
Regulatory Reform Bill [Hl] - continued          House of Commons

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Example 4

The Trustee Investments Act 1961 provides default powers that, inter alia, enable trustees to invest in some things but not others. The proposed Deregulation (Trustee Investments) Order, laid in February 1997, sought to remove the restriction on what trustees could invest in, thus enabling them to invest in whatever they chose. An argument could be mounted that legally the 1961 Act was in fact a liberating measure, set against the common law and statutory history of gradual easing of investment powers. If the 1961 Act were not in existence, trustees without explicit or sufficiently wide powers of investment in their trust documents would be able to invest in even fewer things. So it could be argued that the 1961 Act legally defined rather than restricted trustees' default powers. But, in reporting on this proposed deregulation order, the House of Lords Delegated Powers and Deregulation Committee, which scrutinises deregulation orders, was satisfied that in present day circumstances the Act constituted a restriction and therefore a burden. However, the proposal was not pursued following cautious advice that there was a risk that the order could be held to be ultra vires on the basis of a narrow view of "restriction". If widows and orphans had lost as a result of trustees reasonably investing on the basis of the order, either the trustees or perhaps the Government could have been liable.

The risks in this case outweighed the benefits of early change which would have resulted from a deregulation order. The change has since been taken forward as part of the Trustee Act 2000.

63. The remainder of subsection (1) excludes from the definition of "burden" any burden that only affects a Minister of the Crown or government department. This means that, while local authorities, schools, hospitals, non-departmental public bodies and other public sector bodies could be the sole beneficiaries of an order, Ministers and government departments cannot be the sole beneficiaries; someone else must also benefit.

64. Subsection (2) makes clear that any reference to creating, imposing, removing or reducing burdens applies not only to free-standing burdens but also to situations where the law authorises or requires a burden to be imposed. This will allow orders to deal with cases where the primary legislation itself cannot be said to impose a burden because all it does is confer a power, but where what can be done under the power is burdensome. For example, the mergers legislation does not itself prohibit mergers, but it authorises the Secretary of State to do so in certain circumstances.

Clause 3: Limitations on the order-making power

65. This clause constrains the order-making power by imposing four tests, and the Minister proposing an order would be required to seek views on the extent to which the proposal met the safeguards as part of the prior consultation exercise, required under clause 5.

66. The first two tests apply to all orders. The first test, in subsection (1) paragraph (a), demands that the Minister making the order must be of the opinion that it does not remove any necessary protection. This test is reproduced from section 1(1)(b) of the DCOA, and has been applied by the Deregulation Committees widely and robustly. No order can be made unless the Minister is of the opinion that it would maintain any protections that the Minster considers to be necessary. Such protection relates to the checks and balances associated with a particular regulatory regime. The protection does not have to be expressly provided for in statute - an order may replace a protection that was statutory in origin with something non-statutory provided that the Committees could be convinced that there is a guarantee in practice that doing so would maintain necessary protection for the future. They have accepted in principle that protection can be provided in other, non-statutory, forms such as Codes of Practice or British or international standards. The protection also does not have to be for the purposes originally intended by Parliament. For instance, the Sunday trading laws were passed for reasons of religious observance whereas now they are just as likely to be seen as providing protection for employees. The concept of necessary protection can relate to economic, health and safety protection and the protection of civil liberties. It can also extent to protection for the environment and national heritage. Not all protection need be seen as necessary. For example, the law forbidding 16- and 17-year-olds from working in the bar areas of public houses was amended in 1997. The legal protection of young people in these circumstances was no longer deemed necessary, although the Department involved had to provide compelling evidence to support this view (see paragraph 27 in Annex A).

67. The second test, in subsection (1) paragraph (b), demands that the Minister making the order must be of the opinion that it will not prevent any person from continuing to exercise any right or freedom which he might reasonably expect to continue to exercise. This "reasonable expectations" test is new to the Regulatory Reform Bill. It recognises that there are certain rights that it would not be fair to take away from people under these procedures, and has certain parallels with the concept of legitimate expectations, but goes further than the minimum human rights guarantees. It is an additional safeguard, intended to form a stiff test for potential orders, in particular those which would remove or reduce burdens on the public sector. Ministers bringing forward orders will need to have consulted thoroughly on the relevant issues and to have given careful consideration to what constitutes "reasonable expectation", as will the scrutiny Committees.

68. Subsection (2) sets out two further tests that apply only to orders that impose new burdens. (These are over and above the objective of proportionality which is in clause 1(1), as described in paragraph 44 et seq).

69. The first test states that the Minister must be of the opinion that the provisions of the order, taken as a whole, strike a fair balance between the public interest and the interests of the persons affected by the burden being created. To return to the illustrative example used in paragraph 45 above, the Minister may feel that there is a need to maintain or improve the protection of consumers afforded by a licensing regime at the same time as reducing the overall burden of the regime. This might be achieved by imposing a less onerous licensing requirement on a greater number of licensees. Again, whatever the Minister decides, he must explain his reasoning in the document he lays before Parliament under clause 6.

70. The second test, which also applies to orders that impose burdens, states that the Minister must be of the opinion that it is desirable to make the order either in terms of the reduction of other burdens or in terms of the benefits for persons that are currently affected by the burdens. This means that the Minister must take into account either the reduction in burdens (which, under clause 1(3), must form part of any order) or other benefits for those currently affected by the burdens. Such benefits might include increased legal clarity, less administrative complexity, or less easily defined benefits such as that which would accrue to Welsh people in England if, as is proposed, they were relieved of the burden of not being able to register births or deaths in Welsh. The factors must be significant enough to make the order as a whole desirable.

71. The further limitations on the power included in this clause reflect provision made in the DCOA. Subsection (3) sets the maximum penalties that can be imposed for a new criminal offence created by an order under the power. The maximum penalty can be higher when the offender is convicted on indictment (in the Crown Court in England or Wales, and in the High Court or the Sheriff's Court in Scotland) than when he is convicted summarily (in a Magistrates' Court in England and Wales and in the Sheriff's Court in Scotland). The maximum penalty is two years' imprisonment and/or an unlimited fine on indictment or six months' imprisonment and/or a fine of (currently) £5,000 on summary conviction. These rates will vary as the standard scale set out in the relevant pieces of criminal law cited in the subsection is changed.

72. Some offences are triable either summarily or on indictment, and subsection (4) ensures that the relevant limits in subsection (3) apply to these cases.

73. Subsection (5) limits the enforcement powers which can be conferred by a regulatory reform order. Powers of forcible entry, search and seizure, and powers to compel people to give evidence, may only be conferred in similar circumstances to provision made for that purpose in the legislation being reformed.

Clause 4: Statutory instrument procedure

74. Subsection (1) requires that orders be made by statutory instrument. Subsection (2) sets out the standard provision for the draft affirmative order procedure.

75. Subsections (3)-(11) provide for detailed provisions of orders to be amended by either negative or affirmative resolution procedure. The wide scope of the DCOA enabled matters to be prescribed by a further order (as, for example, with the Deregulation (Corn Returns Act 1882) Order (S.I., 1996, No. 848) where minor detail was set out in the Corn Returns Regulations (S.I., 1997, No. 1873)). However, this power was very limited in practice, because of the need to ensure that any such regulations maintained necessary protection.

76. The Bill does not contain an express power for orders to sub-delegate. However, given that it would be possible for an order to re-enact existing provision and that it can do so with or without amendment, one option that would help preserve flexibility would be for an order to adapt an existing power to make sub-delegated legislation. Such a reform could involve extending an existing order-making power to cover new but related matters, but not to the extent of providing for an open-ended and unconstrained power or one covering entirely new provision from that permitted by the original power to sub-delegate.

77. Where that option was not available, it would be open to the Minister to identify certain provisions in the draft regulatory reform proposal as subordinate. This new approach allows Parliament to see what is proposed as subordinate provisions when considering the draft regulatory reform order but also enables such provisions to be amended subsequently by statutory instrument. It allows for parts of a proposed regulatory reform order to be designated as subordinate provisions, thereby enabling Ministers to change them subsequently either by negative resolution order or affirmative resolution order, if the need arises. It is envisaged that subordinate provisions would usually be included in schedules to the main part of the regulatory reform order, in the same way as technical detail is omitted from Articles in European Community legislation, but rather set out in Annexes.

78. This approach is more open and accountable, in that the elements that the Minister sees as subordinate would have to be identified in advance in the consultation paper, the draft Order itself and details provided in the explanatory document presented under Clause 6. In order to satisfy the scrutiny Committees that there was not an issue of inappropriate sub-delegation, the main order would set out the principles that govern the detailed matters and those principles would not themselves be amendable - but the detail as identified as subordinate provisions would be amendable. During consideration of the proposed regulatory reform order, the main safeguards would be the ability of either scrutiny Committee to:

  • insist, on pain of an adverse report, that the main principles were set out in the main part of the order, which would be unamendable (except by a further full regulatory reform order). Indeed, the Committees could set out in their reports what unamendable principles they would require in the main body of the order - for instance, they could decide that the main order should set out the principles governing the sale of goods by weight, but that it could also identify as subordinate provisions a schedule setting out the precise list of those goods that were to be sold by weight; and

  • similarly insist that any change to particular subordinate provisions should be by way of affirmative rather than negative resolution procedure.

79. Subsequently, there would be the additional safeguard of further Committee scrutiny at the time any subordinate provisions order was made by either negative or affirmative resolution procedure. It will be for Parliament to decide in due course which Committee should exercise that scrutiny role.

80. As the order has to be tabled in a complete form as a combination of both main and subordinate provisions, it would not be possible to have a "skeleton" order. The kind of details that would be dealt with by a subordinate provisions order (which could have been dealt with under the DCOA) would be matters of administrative arrangement such as the precise detail of an application form, the number of copies of the form required and any accompanying fee, etc. In addition, a subordinate provisions order might cover the more technical details of the legislation, such as procedures needed to give effect to principles set out in the main part of the order. Such details may change from time to time. Without provision for a subordinate provisions order, the only way to change the details would be to undergo the full consultation and scrutiny procedure, which might be viewed as an inappropriate use of Parliamentary time and would be likely to lead to delay.

81. Subsection (5) makes clear that subordinate provisions orders can make provisions that purely apply burdens and that, as such, the safeguard in clause 3(2)(b) does not apply. This is to ensure that subordinate provisions orders could be used, for example, to raise the level of a fee from time to time. They could also be used, for example, to add to lists of things subject to some requirement.

82. Subsection (6) specifies the role of the National Assembly for Wales in making subordinate provisions orders relating to Wales. The purpose is to reflect the devolution settlement.

83. Subsection (7) to (11) provide the Parliamentary procedure for either the affirmative or negative resolution. Both types of affirmative procedures are envisaged: subordinate provisions orders can either be made following approval by both Houses, or within twenty-eight days should an order need to be made during a recess.

84. Subsection (12) makes clear that subordinate provisions orders are not subject to the public consultation and Parliamentary scrutiny procedures required for the regulatory reform orders themselves.

Clause 5: Preliminary consultation

85. This clause sets out the first steps in the procedure for making an order, and is based on section 3 of the DCOA, with some additions to take account of the widened power. Subsection (1) lists those parties who must be consulted by a Minister before he takes his proposals any further. Under paragraph (c) the Minister is required to consult the Law Commission and/or Scottish Law Commission "in such cases as he considers appropriate". The circumstances in which this might be the case would be when one of the Commissions had relevant experience concerning the subject-area covered by the order, perhaps because it was within the current or recent programme of work. It is envisaged that this would be likely in cases where the reform touched on the common law or where the removal of inconsistencies and anomalies was contemplated. Under paragraph (d) the Minister is also required to consult the National Assembly for Wales when provision made by the order would extend to (i.e. apply within) Wales.

86. If the Minister varies his proposals as a result of the consultation he has undertaken, subsection (3) requires him to consult again as appropriate. The subsection makes clear that the Minister does not have to repeat the whole consultation exercise; the additional consultation is only in respect of those elements of his proposal that he has changed and might involve only those consultees affected by the change.

87. Subsection (4) allows any proposal that has undergone the consultation process before the Bill is passed to be carried over, without having to repeat the consultation. A form of words has been agreed with the current scrutiny Committees for insertion in any consultation documents on prospective use of the power, and can be found at Annex I.

Clause 6: Document to be laid before Parliament

88. As detailed in paragraph 8 above in respect of deregulation orders, the next step following the required consultation is for the Minister to lay his proposals before Parliament. Subsection (1) sets out how this is to be done. The Minister has to lay a document in the form of a draft order, setting out in detail all the relevant information about his proposals, as specified in subsection (2).

89. This information enables the Committees scrutinising the proposal to take into account all the relevant factors. Once laid before Parliament, this document is in the public domain.

90. Proposed regulatory reform orders will also be accompanied by a statement of the Minister's views on its compatibility with the Convention rights. This is in line with the commitment made by Lord Williams of Mostyn (House of Lords Hansard 2 November 1999, Col 738) that Ministers would always inform the House whether they are satisfied that secondary legislation subject to the affirmative procedure is compatible.

Clause 7: Representations made in confidence or containing damaging information

91. This clause sets out what should be done when someone responding to the consultation exercise on a proposed order requests that their response should not be disclosed. The reason for allowing representations to be made in confidence is that, for example, where there is a proposal to relax a requirement, someone might want to show how the existing control has enabled a major fraud to be detected. Or there may be commercially confidential information either as to the benefits or adverse effects to be expected as a result of a proposed order.

92. Subsection (2) makes clear that the fact that the respondent has made representations should always be disclosed. That is, no respondent would be able to exclude his name from the list of respondents that is presented to Parliament under clause 6(2)(k). However, the Minister should not disclose the content of that representation without the express consent of the respondent and, if the representation relates to a third party, their consent too. Alternatively, the Minister may disclose the content of the representation in such a way as to preserve the anonymity of the respondent and any third party involved.

93. In debate in the House of Lords, concerns were expressed as to whether greater protection should be given to a particular class of consultee. The example given was that of elderly persons living near a public house who may want to keep their name secret after giving details of disturbances from that particular establishment. In response (House of Lords Hansard, 13 Feb 2001, Col 201), Lord McIntosh of Haringey said:

"A balance has to be struck--and there is no perfect answer--between openness and protection. I acknowledge the point about the elderly lady. However, I believe that, in 99 cases out of 100, the elderly lady who, to use the noble Lord's example, is upset about changes to the licensing law, will make her appeal to Parliament or to Ministers, not in the context of a regulatory reform order but in the context of a particular application for a licence."

94. Later in the debate, Lord McIntosh of Haringey went on to argue that the case for openness was stronger (House of Lords Hansard, 13 Feb 2001, Col 200-201):

"The purpose of requiring Ministers to disclose the names of respondents to the committee is to prevent them from being subjected to undue pressure to make particular changes to legislation. I repeat that a weak or corrupt Minister might want to keep secret representations that were to the financial or political advantage of the Government and might influence his judgement. We would certainly wish to head off concerns about the possibility of secret representations from those with financial interests. Although it is a matter of protecting Ministers, it is also a matter of protecting the public from Ministers who might misrepresent the consultation process for their own ends".

95. Subsection (3) governs the requirements for disclosure where a respondent has given information about a third party which the Minister believes may be damaging to the interests of that third party. In such cases the respondent may not have requested confidentiality. The Minister does not have to pass on such information to Parliament if he does not believe it is true or he is unable to obtain the consent of the third party to disclosure.

96. However, there may be cases where one or both of the Deregulation Committees wishes to have access to the representations as originally submitted. Subsection (4) provides for this. This provision acts as a safeguard against improper influence being brought to bear on Ministers in their formulation of regulatory reform orders. The fact that responses may be released to the Committees in this way will be made clear in the consultation document accompanying any proposed order.

Clause 8: Parliamentary consideration of proposals

97. This clause mirrors section 4 of the DCOA. Subsections (1) and (2) provide that Parliament shall have 60 days to consider any proposal laid in the form of a draft order. Only after the 60 days have passed may the Minister proceed to lay a draft order. As set out in Parliamentary Standing Orders, this 60 days is the time during which the two Deregulation Committees scrutinise the proposed order and produce their reports.

98. Subsection (3) excludes from the calculation of the 60 day period any time when Parliament is not sitting for more than four days. The effect is that consideration of proposed orders can be carried over from one Session to the next, and from one Parliament to the next.

99. Subsections (4) and (5) are concerned with the next stage in the procedure, when the Minister lays the draft order proper. Subsection (4) requires him to take account of any representations made during the 60 day period and in particular the reports from the Deregulation Committees. Subsection (5) requires him to lay a statement alongside the draft order, giving details of any such representations, resolutions or reports, and to highlight any changes he has made to the proposed order as a result.

100. Subsection (6) makes clear that the provision in clause 7 for representations made in confidence or containing damaging information applies to any representations made during the 60 days as well as to those made during the preliminary consultation stage. The exception is the provision for the Deregulation Committees to request access to particular representations, which only applies at the earlier stage.

Clause 9: Codes relating to enforcement of regulatory requirements

101. Subsection (1) confers a power to make codes of practice relating to enforcement of regulatory requirements. Subsection (1)(a) outlines the first element of the context within which the power is intended to operate: the identification of statutory requirements that are enforced. Use of the terms "restriction", "requirement" and "condition" is explained at paragraph 56 above.

102. Paragraph (1)(b) outlines the second precondition that must be met before the power can be exercised. In forming its view that the enforcement officers' practice "ought to be improved", the appropriate authority (as defined at subsection (5)) might take into account factors such as the take-up and compliance with the Enforcement Concordat and the extent and merit of business dissatisfaction with current enforcement practice. It will be a matter of judgement by the appropriate authority whether the current practice "ought to be improved". That view will be tested by consultation, which is provided for in clause 10.

103. The remainder of subsection (1) provides that, if these two preconditions are met, the appropriate authority may issue a code of practice setting out recommended enforcement practice. A code of practice would be likely to contain elements based on, but not identical to, the existing Enforcement Concordat.

104. Subsection (2) sets out two different but not exclusive approaches for framing a code. The aim is to allow a code to be tailored to the enforcement problems that are driving Ministers to exercise the power. Subsection (2)(a) provides that a code could apply to all enforcement officers enforcing a particular legal requirement. For example, it could apply to any enforcement officer enforcing the law on health and safety at work. If this approach were to be followed, the code would include a list of the legislation to which it applied. The alternative approach, at subsection (2)(b), is for a code to apply more specifically to enforcers of a particular description, or to enforcers in specified areas. For example, a code could be applied to all trading standards officers or to all environmental health officers, or to all such officers in a particular geographical area.

105. Subsection (3) deals with the effect of any code. The first stage, at subsection (3)(a), is for a court or tribunal to have found that a defendant is guilty of a breach of a restriction, requirement or condition. The second stage is to determine whether there is a relevant code of practice (as detailed at subsection (3)(b)). If so, the court or tribunal may form a view whether enforcement officers failed to comply with the code (as detailed at subsection (3)(c)). Once these three steps have been completed, the court or tribunal may take into account that failure in deciding how to deal with the regulatory breach. The court would not take compliance with the code into account in determining whether or not a regulatory breach had occurred. The way in which the court or tribunal may take non-compliance with the code into account might be when considering the appropriate penalty for an offence or in considering awards of costs. This approach means that the code is not directly binding on enforcement bodies and there is no direct penalty on the enforcement authority for non-compliance.

106. The effect of subsection (4) is to limit application of any code in Scotland to those matters that have been reserved to the UK Parliament.

107. Subsection (5) defines several terms. The "appropriate authority" exercising the power would normally be a UK Minister at Westminster (expected to be the Minister for the Cabinet Office). However, in the case of a code that relates to an enforcement function of the National Assembly of Wales, such as the control of animal health and welfare in Wales, the Assembly is given the power to set out a code. A UK Minister at Westminster could also exercise the power in respect of these functions but only with the consent of the Assembly. This provides a mechanism by which a single code embracing enforcement in both England and Wales could be applied if considered appropriate. For example, one code could apply to all farm inspectors in England and Wales, assuming that there is consensus between the UK Government and the Assembly.

108. The definition of "enactment" does not affect the meaning of this term in clauses 1-8. Its effect is that the subject of any code may be subordinate legislation as well as restrictions, requirements and conditions imposed directly by primary legislation.

109. The effect of the definition of "enforcement officer" is the same as that in section 5(6) of the DCOA.

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Prepared: 6 March 2001