House of Commons - Explanatory Note
Legislative and Regulatory Reform Bill - continued          House of Commons

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Clause 14 - Negative resolution procedure

61.     This clause sets out the procedure which will apply where an order is to be made under the negative resolution procedure. The Minister may make an order in the terms of the draft he laid (allowing for non-material changes) unless, within 40 days of the draft order being laid, either House of Parliament passes a resolution that the order may not be made.

Clause 15 - Affirmative resolution procedure

62.     This clause sets out the procedure which will apply where an order is to be made under the affirmative resolution procedure. The Minister may make an order in the terms of the draft (allowing for non-material drafting changes, for example as a result of a change of procedure at a Parliamentary committee's instigation) only if, after 40 days of the order being laid before Parliament under clause 12, the draft order has been approved by a resolution of each House of Parliament.

Clause 16 - Super-affirmative resolution procedure

63.     This clause sets out the procedure which will apply where an order is to be made under the super-affirmative procedure.

64.     The procedure is that there is a 60-day period following the laying of the order by the Minister, during which the relevant Parliamentary committees may report on a draft order, or either House may make a resolution with regard to the draft order. The Minister must have regard to any such reports and resolutions, as well as to any other representations made about the draft order. Once the 60-day period has expired, if the Minister wishes to make the order with no changes, he must lay a statement in accordance with subsection (3), and may then make an order in the terms of the draft if it is approved by a resolution of each House of Parliament (in the same way as for the affirmative resolution procedure).

65.     Alternatively, if the Minister wishes to make an order which is a revised version of the draft order he has laid, he must lay before Parliament a revised draft of the order and a statement in accordance with subsection (5)(b) and specifically setting out the revisions he proposes. Having done this, he may then make the order in the terms of the revised draft if it is approved by a resolution of each House of Parliament.

Part 2 - Regulators

Principles and code of practice

Clause 19 - Principles

66.     This clause sets out principles that a person must have regard to when exercising particular regulatory functions. The duty to have regard to these principles is subject to any other legal requirement, such as a statutory duty or a requirement of EC law, which will take priority over the principles. The regulatory functions, as defined in clause 23, to which the principles apply are those specified in an order made under the power in clause 22.

Clause 20 - Code of Practice

67.     This clause enables a Minister of the Crown to issue (and revise) a Code of Practice. Under subsection (2) any person exercising a regulatory function (as defined in clause 23 and specified by order made under clause 22) must have regard to the Code in exercising that function. Again the duty to have regard to the Code is subject to any other legal requirement. Subsection (4) deals with the breach of this duty. Where a court or tribunal finds that a person is in breach of a requirement, restriction or condition, and that the regulator enforcing that requirement etc was under a duty to have regard to the Code but did not comply with that duty, then the court or tribunal can take account of that failure on the part of the regulator when deciding how to deal with the breach of the requirement etc. This means that the court or tribunal may take a breach of the subsection (2) duty into account in mitigation when sentencing for an offence or when awarding damages or costs, or making an order for a penalty.

Clause 21 - Code of Practice: procedure

68.     This clause sets out the procedure the Minister must follow when he proposes to issue or revise a Code of Practice, which is as follows:

  • The Minister must prepare a draft of the Code (subsection (1)) and seek to ensure that it is consistent with the principles set out in Clause 19 (subsection (2));

  • The Minister must consult about the draft Code with representatives of the persons exercising the functions specified in the order made under clause 22 and any one else he considers appropriate (subsection (3));

  • The Minister must lay the draft, with modifications if appropriate, before each House of Parliament (subsection (4));

  • If, within 40 days of laying, neither House has made a resolution not to approve the draft, the Minister must issue the Code in the form of the draft which will come into force on a day appointed by order (subsections (5) to (7)).

Supplementary

Clause 22 - Functions to which sections 19 and 20 apply

69.     This clause enables a Minister of the Crown to specify by order regulatory functions that are to be subject to the principles and the Code of Practice. The Minister may not specify functions exercisable in Scotland or Northern Ireland if they relate to devolved matters, or functions exercisable only in or as regards Wales. The Assembly may, by order, specify regulatory functions exercisable only in or as regards Wales as functions to which the Code of Practice and principles apply.

70.     The Minister cannot specify in the order the regulatory functions of the Gas and Electricity Markets Authority (Ofgem), the Office of Communications (Ofcom), the Office of Rail Regulation (ORR), The Postal Services Commission (PostComm) or the Water Services Regulation Authority (Ofwat).

71.     The Minister (or the Assembly where appropriate), before making the order, must consult any regulator whose functions are to be specified in the order and any other person he considers appropriate. A Minister of the Crown may not make an order unless a statutory instrument containing it is laid in draft before, and approved by resolution of, each House of Parliament. This provision does not apply where the order is made by the Assembly.

     Clause 23 - "Regulatory functions"

72.     This clause defines the regulatory functions that may be specified by the Minister when making an order under clause 22. A regulatory function is limited to a function under any enactment and is a function that imposes, or relates to securing compliance with, or enforcement of, requirements, restrictions or conditions in relation to any activity. The formulation "requirements, restrictions or conditions" derives from section 9 of the 2001 Act. A regulatory function includes a function exercised by or on behalf of the Crown.

Part 3 - Legislation Relating to the European Communities etc

     Interpretation of legislation

Clause 24 - References to Community instruments

73.     This clause makes provision about domestic legislation which refers to "Community instruments" - that is, legal instruments (such as directives or regulations) which are issued by the European Economic Community, the European Coal and Steel Community or Euratom. The clause is designed to make the drafting of domestic instruments simpler. The problem that the clause addresses is that currently, when domestic legislation refers to a Community instrument which has been amended or applied by other Community instruments, it is necessary to specify all the instruments which have amended or applied it. That can make for very long references.

74.     Subsection (1) inserts a new section (20A) into the Interpretation Act 1978 ("the 1978 Act"). The effect of the new section is that, where an Act refers to a Community instrument, the reference is to be taken, unless the contrary intention applies, as a reference to that instrument as amended, extended or applied at the date of passing of the Act.

75.     The new section only applies in relation to Acts passed after commencement of the new section. Subsection (2) contains a consequential amendment to section 22 of the 1978 Act.

76.      By virtue of section 23 of the 1978 Act, the new section will also apply to subordinate legislation, within the meaning of that section, made after the commencement of the new section.

77.     Subsection (3) of the clause contains an amendment to section 24 of the 1978 Act, so that section 20A applies to Northern Ireland legislation, within the meaning of that section, as it applies to Acts.

78.     Subsection (4) amends the Scotland Act 1998 (Transitory and Transitional Provisions) (Publication and Interpretation etc of Acts of the Scottish Parliament) Order 1999 (S.I. 1999/1379) to secure the same result for Acts of the Scottish Parliament.

Clause 25 - EEA agreement and EEA state

79.     The EEA agreement is an agreement between the European Economic Community, the European Coal and Steel Community, their Member States and the members of the European Free Trade Association (EFTA), the purpose of which is "to promote a continuous and balanced strengthening of trade and economic relations .. with a view to creating a homogeneous European Economic Area".

80.     References to an "EEA State" are made frequently in both primary and subordinate legislation necessitating inclusion of a definition on each occasion. This clause introduces standard definitions to avoid having to do this. Subsection (1) inserts definitions of "EEA agreement" and "EEA state" into the 1978 Act. These definitions will apply to all Acts passed after the Bill comes into force. By virtue of section 23 of the 1978 Act, the definitions will also apply to all subordinate legislation, within the meaning of that section, made after the Bill comes into force.

81.     Subsection (2) amends section 24 of the 1978 Act to apply the same definitions to Northern Ireland legislation, within the meaning of that section.

82.     Subsection (3) amends the Scotland Act 1998 (Transitory and Transitional Provisions) (Publication and Interpretation etc of Acts of the Scottish Parliament) Order 1999 to secure the same result for Acts of the Scottish Parliament. Subsection (4) provides that the amendment only applies to Acts of the Scottish Parliament passed after commencement of the new provision.

Implementation of Community obligations etc

     Clause 26 - Power to make orders, rules and schemes

83.     Section 2(2) of the European Communities Act 1972 ("the 1972 Act") enables the implementation of Community law which is not automatically part of UK law. The existing powers do not allow for the making of orders, rules or schemes, and this change is designed to allow section 2(2) to be used in combination with delegated powers in other legislation which enable the making of orders, rules or schemes. Therefore clause 26 makes amendments to the 1972 Act and other enactments, so as to enable the power to make subordinate instruments under section 2(2) of the 1972 Act to be exercised not only by making regulations but also by making an order, rules or a scheme.

84.     Subsections (3) and (4) make consequential amendments to section 29 of the Government of Wales Act 1998 and Schedule 8 to the Scotland Act 1998.

85.     Subsection (5) enables a Minister to make an order or regulations to amend any enactment or subordinate instrument which refers to regulations under section 2(2) of the 1972 Act so that it also includes a reference to any order, rules or scheme made under that subsection.

86.     Subsection (6) enables the devolved administrations to make similar provision in the areas for which they have responsibility. The procedure for exercising this power is set out in subsections (7) and (8). The power is exercisable by statutory instrument (so far as exercisable by a Minister of the Crown, the Scottish Ministers or the Assembly) and, where exercisable by a Northern Ireland department, by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979.

     Clause 27 - Power to make ambulatory references to Community instruments

87.     Clause 27 inserts a new paragraph 1A into Schedule 2 to the 1972 Act. It enables any "subordinate legislation" (as defined by the new paragraph) which is made for a purpose mentioned in section 2(2), to provide expressly that any reference in that legislation to a Community instrument is to be construed as a reference to the Community instrument in question as amended from time to time. (The definition of "subordinate legislation" in the new paragraph 1A(2) is not restricted to instruments made under section 2(2) of the 1972 Act; it also includes instruments made under other Acts, Acts of the Scottish Parliament or Northern Ireland legislation.) Such provision can only be made where it appears to the person making the legislation that it is necessary or expedient for references to Community instruments in the legislation he is making to have that ambulatory meaning.

88.     The reason for this amendment is that it might otherwise be thought that such ambulatory references could not be made. An example of when this power might be useful is where a Community instrument contains lists or tables of technical detail which might be the subject of frequent updating or amendment. A person making legislation which refers to such an instrument could make use of this power in order to avoid the need for the legislation to have to be amended regularly in the future simply to reflect the updating of the Community instrument.

Part 4 - Supplementary and General

Supplementary

Clause 28 - Repeals and savings

89.     Subsection (1) gives effect to the repeals set out in the Schedule to the Bill.

90.     The remainder of this clause provides that, despite the repeal of the 2001 Act, some of its provisions are carried over for certain purposes. Subsections (2) and (3) provide that, if a draft regulatory reform order has been laid under section 6(1) of the 2001 Act before the date on which this Bill comes into force, sections 1 to 8 of that Act will continue to apply to that order. The order may continue to be made as an RRO under the 2001 Act, notwithstanding that Act's repeal.

91.     Subsection (4) provides that even though the 2001 Act is repealed by this Bill, any regulatory reform orders which have been made under the power in that Act (either before the date this Bill comes into force, or after that date if the order is made by virtue of subsection (2) of this clause) are not affected and continue in force. Similarly, subsection (5) provides that the repeal of the 2001 Act does not affect the continuation in force of any order which was made under the power in the Deregulation and Contracting Out Act 1994, provided that it continued in force by virtue of section 12(4) of the 2001 Act immediately before this Bill comes into force.

Clause 29 - Consequential amendments

92.     Subsection (1) amends section 6(7) of the Deregulation and Contracting Out Act 1994, as a consequence of the repeal of sections 9 and 13 of the 2001 Act, so as to substitute the definition of "enforcement action" with the definition that was in section 9 (section 6 of the Deregulation and Contracting Out Act 1994 was previously amended in this way by section 13 of the 2001 Act).

93.     Subsection (2) amends section 100 of the Local Government Act 2003. It replaces a reference to section 1 of the 2001 Act with a reference to section 1 of the Legislative and Regulatory Reform Act 2006.

EFFECT ON PUBLIC EXPENDITURE AND PUBLIC SERVICE MANPOWER

94.     It is not anticipated that the Bill itself will result in any significant effects on central government expenditure or public service manpower.

     REGULATORY IMPACT ASSESSMENT

95.     A full Regulatory Impact Assessment (RIA) of the measures in the Bill has been published alongside the Bill and is available from the Library of the House and online at: http://www.cabinetoffice.gov.uk/regulation/bill/index.asp.

96.     In summary, the Bill contains enabling powers, and therefore no major costs or benefits are directly attributable to it. It is therefore not possible to provide detailed, finite quantification of the likely costs or savings of any of the options, as any costs or savings arising from its use relate to orders made under its powers.

97.     Each order made under Part 1 will be accompanied by an explanatory document which, where appropriate, will include a cost/benefit analysis.

EUROPEAN CONVENTION ON HUMAN RIGHTS

98.     The Cabinet Office has considered all aspects of the Bill from the perspective of compatibility with the European Convention of Human Rights (ECHR). The provisions in Part 1 and 2 contain enabling powers and associated provisions capable of being exercised in a way which is compatible with ECHR rights, because the obligation to do so is already imposed by section 6 of the Human Rights Act 1998. The provisions in Part 3 amend provisions in the Interpretation Act 1978 and related enactments concerning the interpretation of various terms and references in domestic legislation relating to the European Communities. They either raise no issue as to compatibility with the Convention, or contain enabling powers which are capable of being exercised in a way which is compatible with the Convention. Part 4 of the Bill and the Schedule raise no issue as to compatibility with the Convention.

99.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The statement has to be made before second reading. Jim Murphy, Parliamentary Secretary to the Cabinet Office has made the following statement:

In my view the provisions of the Legislative and Regulatory Reform Bill are compatible with the Convention rights.

Annex A

     PROPOSALS WHICH MIGHT BE IMPLEMENTED USING ORDER-MAKING POWERS

     The purpose of this annex is to provide examples of the kinds of reform which are likely to be appropriate under the Bill.

     Reforming legislation

     Under clause 1(1)(a) it will be possible to reform legislation. Examples of the ways in which this order making power can be used are as follows:

  • Simplification and Reducing Administrative Burdens

     Departments are currently developing proposals to simplify legislation and reduce administrative burdens 3. The Department for Trade and Industry, for example, have proposals to simplify legislation relating to employment, the construction industry, weights and measures, consumer rights and the energy industry. These simplification proposals will potentially be implemented using the powers in Part 1 of this Bill. 4 Similarly, the draft simplification plan of the Department for Environment, Food and Rural Affairs (DEFRA) contains proposals from across their policy areas, for example, working with the Environment Agency, they propose to simplify the existing exemption orders under the Radioactive Substances legislation. 5 The power in clause 1(1)(a) will enable more of those proposals which would otherwise require primary legislation to be delivered by way of order.

3 The simplification plans will be subject to scrutiny by the Panel for Regulatory Accountability and the Better Regulation Commission and will all be published by the autumn of 2006.

4DTI Better Regulation Draft Simplification Plan http://www.dti.gov.uk/ewt/cutting_red_tape_plan.doc

5 DEFRA's draft initial simplification plan Lifting the burden, published on 29 November, gives detail and examples of their approach to simplification.

  • Mergers

     It is intended that the order making power in clause 1(1)(a) will be used to effect some of the mergers of regulators that were recommended in the Hampton Report, Reducing administrative burdens: effective inspection and enforcement. Such mergers are apt for the order making power due, in part, to the comparatively small scale of change and the consensus behind such change. An example of specific mergers which might be taken forward by the power in this Bill are those within DEFRA where 21 departmental regulators are being consolidated around five core agencies.

  • Data sharing and e-enabling

     It is hoped that orders made under the power in clause 1(1)(a) will be used to implement measures to facilitate data sharing and electronic information, for example, to reform legislation to enable acceptance of applications or information in electronic form where this is not already possible.

  • Penalties

     It is intended, where appropriate, to use the order making power in clause 1(1)(a) to deliver recommendations about penalty reform made by the Better Regulation Executive Penalties Review being led by Professor Richard Macrory, Faculty of Law, UCL 6.

6 A discussion paper was published on December 7 2005. A consultation document will be published in Spring 2006, with a final report in late 2006. Further details are available from the review's website - www.cabinetoffice.gov.uk/regulation/penalties

Implementation of recommendations of the Law Commissions

     Under clause 1(1)(b) Law Commission recommendations can be implemented, including those that amend common law (clause 2(3)). Usually, these recommendations can only be enacted by primary legislation, for which Parliamentary time is at a premium. This means that several years can often pass between the making of the recommendations and their implementation. The Law Commission's Annual report for 2004 to 2005 stated that 16 of its 29 unimplemented reports had been accepted by the Government in full or in part. On average, these 16 reports have each been waiting for some seven and a half years from their publication for implementation. Many of these recommendations in these reports would be suitable for implementation under the Bill. Examples include the recommendations in the following reports:

?     The Rules against Perpetuities and Excessive Accumulations (1998) Law Com No. 251

?     Limitation of Actions (2001) Law Com No 270

?     Third Parties - Rights against Insurers (2001) Law Com No. 272

 
 
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Prepared: 11 January 2006