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Standing Committee A
The Committee consisted of the following Members:
Chairmen:
Mr. Martin Caton, †Sir Nicholas Winterton
†Austin, Mr. Ian (Dudley, North) (Lab)
†Banks, Gordon (Ochil and South Perthshire) (Lab)
†Carswell, Mr. Douglas (Harwich) (Con)
†Chope, Mr. Christopher (Christchurch) (Con)
†Cooper, Rosie (West Lancashire) (Lab)
†Dhanda, Mr. Parmjit (Gloucester) (Lab)
†Harper, Mr. Mark (Forest of Dean) (Con)
†Heald, Mr. Oliver (North-East Hertfordshire) (Con)
†Heath, Mr. David (Somerton and Frome) (LD)
†Hillier, Meg (Hackney, South and Shoreditch) (Lab/Co-op)
†Hodgson, Mrs. Sharon (Gateshead, East and Washington, West) (Lab)
†Howarth, David (Cambridge) (LD)
†Keeley, Barbara (Worsley) (Lab)
†Love, Mr. Andrew (Edmonton) (Lab/Co-op)
†Murphy, Mr. Jim (Parliamentary Under-Secretary of State for the Cabinet Office)
†Seabeck, Alison (Plymouth, Devonport) (Lab)
Watkinson, Angela (Upminster) (Con)
Frank Cranmer, Geoffrey Farrar, Committee Clerks
† attended the Committee
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Thursday 9 March 2006
(Afternoon)
[Sir Nicholas Winterton in the Chair]
Clause 22
Functions to which sections 19 and 20 apply
Question proposed [this day], That the clause stand part of the Bill.
1 pm
Question again proposed.
The Chairman: The Minister advises me that just prior to the adjournment at 10.25 am, he was in the process of sitting down at the end of his remarks.
Mr. Christopher Chope (Christchurch) (Con): On a point of order, Sir Nicholas.
The Chairman: On what I have said?
Mr. Chope: On what you have reported, Sir Nicholas. The Minister had not sat down, and I had asked him in an intervention to return this afternoon with details on why the provisions of part 2 of the Bill did not apply to Her Majesty’s Revenue and Customs. I understood that he had given an undertaking that he would come back and respond to that question.
The Chairman: I am not sure that that is entirely a point of order, but it is certainly a point. The Minister will no doubt have heard it, and if wishes to rise to his feet to respond, I shall most certainly call him. He is not rising, but the debate can continue, so if the hon. Gentleman is now seeking to catch my eye to contribute to it, I am more than happy to call him.
Mr. Chope: I had thought that it would not be necessary for me to contribute further. This is an important debate about the scope of part 2 of the Bill. It is accepted that the work of Her Majesty’s Revenue and Customs has a major impact on small business and businesses generally in this country and falls squarely within the definition of regulatory function in clause 23. However the Minister has told us that, for some reason that I am trying to get to the bottom of, HMRC will not be subject to the important provisions of part 2. I have asked why on several occasions, and I ask again in the hope that it will encourage him to get to his feet rather than play for the 4 o’clock end. I hope that he will also be able to respond to points that were made about other bodies that could be covered by these provisions, but perhaps will not be.
Mr. Andrew Love (Edmonton) (Lab/Co-op): I clearly heard from the Minister that this part of the Bill was based on the recommendations of the Hampton review, and that annexe B of that review did not
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include the organisations that the hon. Gentleman has mentioned. That might not be acceptable to him, but it has been explained on two occasions in Committee.
Mr. Chope: The hon. Gentleman tries to come to the Minister’s defence, but unfortunately if he looks at the long title of the Bill and at its scope, he will see that there is no reference to the Hampton review. The Bill will facilitate deregulation and reduce burdens on business—that is to take it at its face value and is how the Government have been promoting it.
The Hampton review refers to HMRC, and I am pointing out that that body has a major impact on businesses through its regulatory function and that it should surely be subject to the same regime, set out in part 2, as other regulators and bodies exercising regulatory functions within the meaning set out in clause 23. HMRC is clearly within the scope of the Bill; part 2 does not say “some regulators.”
Mr. Oliver Heald (North-East Hertfordshire) (Con): Does my hon. Friend agree that small business organisations such as the Forum of Private Business are particularly concerned about the administrative burdens that are the result of tax? It would be a pity if the tax authorities did not have to comply with such obvious points as acting in
“a way which is transparent, accountable, proportionate and consistent”
and targeting
“cases in which action is needed”.
That is what we would like them to do.
Mr. Chope: My hon. Friend is absolutely right. Does he share my frustration that the Minister’s stonewalling threatens to thwart what was quite a constructive discussion on part 2? We thought that we had got some common ground with the Government, on the basis that we are all in favour of deregulation and reducing the administrative and regulatory burden on business.
Mr. Love: As the chairman of the all-party small business group, I am not aware that the Forum of Private Business has the policy proposal that the hon. Member for Christchurch (Mr. Chope) suggests. Is he speaking on behalf of those on the Conservative Front Bench? Is it their position that we should include Her Majesty’s Customs and Revenue in the Bill?
Mr. Chope: I certainly hope that it will be, but I do not speak from the Front Bench. That is why I am as far back as I can get without going through the wall.
I have every confidence in my hon. Friend the Member for North-East Hertfordshire (Mr. Heald), and I am sure that when we come to Government, he will want to ensure a level playing field for all regulators, including Her Majesty’s Revenue and Customs. We might make it one of the most important elements of our manifesto to seek fair play with regard to HMRC, whereas the present Government do not seem to want to. I hope that we will provoke a response from the Minister, and an explanation and justification for the exclusion of HMRC from the proposals. It was not included in detail in the
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Hampton review, because the Chancellor of the Exchequer, who set up the Hampton review, did not want to include it—surprise, surprise.
That does not address the substantive point, however. The Government are saying with the Bill, “The burden on business is too great. We are on the side of business and we want to help business.” A letter from the deputy director-general of the CBI appeared in one of the newspapers recently in which he says that the Bill is a great Bill but would be much better if it extended part 2 to organisations such as HMRC.
While the Minister prepares to respond to that point, I also ask him whether it is proposed that clause 22 should apply to the Standards Board for England. He might have seen during our break today, as I did, a report on page 6 of today’s Evening Standard that said that a watchdog, namely the Standards Board for England, caused the leader of an Islington local authority and four of his colleagues to be
“subjected to the longest-ever probe”.
They were left with a legal bill for £350,000, and the total costs of the proceedings topped £1.1 million. The Standards Board has apologised now, but it does not have any proposals for compensating those individuals who were on the wrong end of maladministration and abuse of regulatory power. I should like the Minister to assure us that the Government intend to include the Standards Board in the provisions and ensure that it must comply with the regulatory regime like other regulatory bodies.
Mr. David Heath (Somerton and Frome) (LD): I do not want to repeat the arguments already made by the hon. Member for Christchurch, but the more I think about it, the more I think that we need some sort of list of regulators that the Government intend to include. I agree with him about the Standards Board, which some of us feel should be abolished in any case. Setting that aside, however, his is a well made point. The direct application of regulatory functions by Ministers happens in various Committees, and it is instructive that the Treasury is most resistant to any overview from outside of its functions. The question arises, for instance, of whether the new equalities commission will be a regulator under this Bill. I do not know what the answer to that is, but perhaps the Minister can tell us.
My conclusion is that although the Minister has been at pains to suggest that having considered the difficulty of providing a schedule of inclusion, he has effectively gone for a schedule of exclusion either specifically under clause 22 or by implication under earlier parts of the Bill. Nevertheless, we will have to have some sort of idea of which bodies, set up under statute or otherwise, are considered to have regulatory functions that are relevant to the Bill.
The Chairman: I invite the Minister to reply.
The Parliamentary Under-Secretary of State for the Cabinet Office (Mr. Jim Murphy): I accept your kind invitation, Sir Nicholas, and welcome you again to your position as co-Chairman for our deliberations in our final sitting of this Committee.
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I was under the impression that we had brought our deliberations on this clause to a conclusion, but I am happy to respond to some of the specific points that have been raised. The hon. Member for Christchurch referred to a report in the Evening Standard. I am more of a Glasgow Evening Times man myself. I do not regularly read the Evening Standard, so I cannot comment on the specifics of the report. I am sure that it is of high quality. I have no idea whether the hon. Gentleman quoted from the story; he did not share that fact with us. We do not envisage that the regulatory function would apply to the Standards Board.
There will be an opportunity for Ministers to extend the sense of “regulatory functions” after consultation under clause 22(2). Although the Government have no intention to do so, the enabling power would be there. The hon. Gentleman also asked about the list in clause 22(5). I know that that was not his main point, but I think he mentioned a list. I can do no more—I do not think he would wish me to—than repeat verbatim the answer I gave earlier. Those bodies were outside the scope of the Hampton review, and their operation is an area of market security and sensitivity. It would not be appropriate for the clause to apply to them. As for the question of whether we should have a list of regulators, and whether it is better to have a list of regulators or regulatory functions, we will come to that discussion in our debate on clause 23, which is about regulatory functions.
I remind the Committee, as I said earlier, that there has been an attempt to define “regulator” rather than “regulatory function”. It has proven extraordinarily difficult to do that in any legal sense. We spoke about that this morning. An attempt to define “regulator” and to draw in all sorts of people would not be appropriate. The British Medical Association and MI5 were mentioned—MI5 cannot in any sense be considered a regulator—but it was difficult to draw a definition of a regulator.
Mr. Heath: That was a difficulty that we also encountered when we were dealing with the Freedom of Information Act 2000, when discussing what constituted a public body. It was extremely difficult to identify what constituted a public body and, in the end, there was a capacity to list public bodies, or organisations and individuals who were to be treated as public bodies, and the capacity to amend that list by subsequent order. There is an analogy in this case.
Mr. Murphy: I accept the hon. Gentleman’s argument because of his previous experience. As I say, we will discuss that in clause 23 and he will have the opportunity to tease out that point a little more.
Mr. Chope: The Minister still has not addressed the issue about Her Majesty’s Revenue and Customs, and I hope that he will before he finally sits down.
Mr. Murphy: I was going to turn to hon. Gentleman’s point, which is a reasonable one, in my next sentence. He is right to say that, this morning, we had quite a productive debate, and the tone of the debate has been very constructive.
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In relation to the Bill, Her Majesty’s Revenue and Customs is considered to be a tax authority, rather than a regulator. That is the explanation, even if it is not one that people like. The hon. Gentleman is also right that the Hampton report referred to HMRC, but as far as I am aware it referred to the HMRC only as being outside of its scope, rather than within its responsibility or aegis.
Mr. Chope: The Minister says that he is defining HMRC as a tax authority, but does he accept that it carries out regulatory functions within the definition in clause 23, and that therefore it could and should be covered by the Bill?
Mr. Murphy: The hon. Gentleman makes a bid for the Bill to be extended to HMRC, and he is entitled to do so. To reassure both him and the Chancellor, I am not seeking to redefine, as part of our discussions on clause 22, the purpose or the aim of HMRC. We view the Customs as a tax authority rather than a regulator. That does not deal with one of his specific points, but that is the definition that we are using for the Bill, including for regulatory functions under clause 23.
We shall discuss the point further when we reach clause 23. I do not know, Sir Nicholas, whether you are encouraging us to have a stand part debate on clauses 22 and 23 but I shall be happy to address this further during the debate on clause 23, if the hon. Gentleman so wishes.
Question put and agreed to.
Clause 22 ordered to stand part of the Bill.
1.15 pm
Clause 23
“Regulatory functions”
Question proposed, That the clause stand part of the Bill.
Mr. Chope: Following the Minister’s invitation to continue, in relation to clause 23, the debate that we were having on clause 22, does he agree that the functions described in clause 23 are very wide ranging, and that that is a big advantage? However, it is disappointing for the Government to indicate that when it is embarrassing to include the regulatory functions defined in clause 23 for some Departments in the scope of the requirements of clause 19 and in the code of practice in clause 20, they will not play ball.
Obviously, HMRC raises tax—that may be its primary responsibility—but it also exercises regulatory functions, because within the meaning of subsection (1), it imposes “requirements, restrictions or conditions” in relation to activities. Does the Minister concede that HMRC has regulatory functions within the scope of clause 23, and can he explain why, notwithstanding that, it will not be subject to the same regime of common-sense reduction in the burden of regulation as other regulators?
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Mr. Love: Using the criteria that the hon. Gentleman has just outlined, will he say why he has focused on HMRC? Surely the point applies to a considerable number of Departments. Why does he not include those in relation to the Bill?
Mr. Chope: Because I know that we have to finish our deliberations by 4 pm and I thought that it would be better to give a representative example, rather than going through an exhaustive list. To answer the hon. Gentleman’s point directly, if he looks at annexe B of the Hampton report, he will see that paragraph 20 contains a list of what it describes as “Notable UK Regulators”. First on that list is none other than the HMRC. I concede that the Standards Board is not on the list—it certainly is not so high up, anyway—but the HMRC is right at the top, which is why I have tended to dwell on that organisation.
Mr. Murphy: I do not want to make a habit of intervening on the hon. Gentleman, but he referred to page 84 of the Hampton report and said that there was a list of notable UK regulators, the first of which was HMRC. It would have been helpful to the Committee had he given the full title on that page, which is
“Notable UK Regulators out of scope”.
He did not provide the Committee with that fact.
Mr. Chope: Of course those regulators are out of scope: the Chancellor of the Exchequer said that they must be. That is the only reason for their being out of scope. The intervention from the hon. Member for Edmonton (Mr. Love) was about why I picked on HMRC as an important regulator. The Hampton report considers it to be a notable UK regulator but, as the Minister has said, the Chancellor said that the Hampton report could not consider the regulatory functions of the HMRC. That is why it has not been included and is out of scope.
Interestingly, there is a justification in annexe A as to why Ofgem, the Office of Rail Regulation, Ofwat, the Civil Aviation Authority and so on are excluded: they are “economic regulators”. The Minister has referred to that. However, no justification is contained or recorded in the Hampton report as to why the HMRC is excluded. That seems to be a supreme example of Treasury double standards: “Let’s set a regime for everyone else but not for our own home team.”
As the Minister does not come from the Treasury, I hoped that he would be more upbeat and say that he hopes that, in so far as the HMRC has regulatory functions that impact on the administrative and other burdens on business, it will be happy to comply with the spirit and the letter of the code of practice that will be drawn up under part 2 of the Bill. Repetition will make no difference, but I hope that he will be able to exercise some flexibility and respond to the challenge that if the HMRC exercises regulatory functions, it should be subject to the same controls as other regulators.
Mr. Heald: I want to consider my hon. Friend’s point about the HMRC being a major regulator and a body that is potentially covered by part 2. It is well
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known that small businesses in particular feel very burdened by the requirements of the HMRC. Earlier this week, I spoke to representatives of the Forum of Private Business, who said that they had just completed a survey of small business about the tax burden and that there was a great groundswell of concern about the administrative burdens imposed on small business. I am sure that the hon. Member for Edmonton will look forward to seeing the report when it is published.
I hope that when the Minister considers his list of who is to be included and who is not, he will not just go for the easy targets and will consider dealing with all these various bodies that are now “Of” something or other—Ofgas, Ofwat and the rest of them. It would be wrong to let off the “Ofs”. We need to have a system where the main regulators in this country set the standard, trailblazing for good principles of the sort set out in clause 19—transparency, accountability, proportionate behaviour, consistency—and targeting their actions. They should not be the ones who lag behind. It is a point that I have made before, but I hope that the Minister will at least consider it.
Mr. Murphy: I will respond briefly. I congratulate the hon. Gentleman on using the same joke in two consecutive sittings of our Committee. I do not know why he chose to do it, although I could hazard a guess.
Mr. Heald: It is a different Chairman.
Mr. Murphy: It is a different Chairman, Sir Nicholas. That is the purpose of it.
I simply remind the hon. Gentleman of the point that I made when he made a similar remark. Those regulators listed in clause 22(5) were not within the scope of the Hampton review because their work is different in nature and scope from the general business regulators that Hampton dealt with. Secondly, they operate in areas of market security and sensitivity and it is important to avoid the uncertainty that that may create.
Mr. Heath: I wonder whether the suspicion that a regulator may be acting in a non-transparent, unaccountable, disproportionate or inconsistent way might affect the markets in any way as well.
Mr. Murphy: What we are setting out is that regulators, with the exceptions that are a statutory responsibility, must adhere to the principles within clause 19 and any code of practice in clause 20, which we will consult on. It is certainly my understanding that the regulators listed in clause 22(5) will have a challenge instead of regulatory functions, but also parameters within which they must operate in respect of how they interact with business and others. It may be helpful before Report to examine the specific areas in which those five operators function as a matter of information for the hon. Member for Somerton and Frome (Mr. Heath). If he wishes we can discuss that, so that he can analyse the way in which they operate and their sensitivity to the better regulation agenda, which I know he cares about.
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I absolutely agree with the hon. Member for North-East Hertfordshire about small businesses. He made a reasonable and important point about the need to lighten the load of bureaucratic burdens on them. Some important steps have been taken in that regard in recent times, but we need to go much further. Without wishing to stray on to other clauses, he rightly supports the fact that one of the aims of the Bill is to remove unnecessary bureaucracy, outdated regulations and unnecessary burdens.
On the point about the HMRC, obviously the definitions in the clause are designed to be broad enough to capture the wide-ranging functions carried out by those regulators covered by the Hampton review. Their purpose is to enact the findings of the Hampton review. That is an additional reason why the Bill does not cover the HMRC, which is top of the list on page 84 in annexe B of notable UK regulators that are out of scope of the review. The HMRC has its own ambitious better regulation agenda, which my right hon. Friend the Chancellor published in an action plan at the time of the last Budget. That action plan, which is a publicly available document, sets out how the HMRC carries out the better regulation agenda in a way that matches its responsibilities. I hope that that reassures hon. Members, but of course they can draw on that specific document if they seek additional information on the way in which the HMRC is regulated in that respect.
Question put and agreed to.
Clause 23 ordered to stand part of the Bill.
Clause 24
References to Community instruments
Question proposed, That the clause stand part of the Bill.
1.30 pm
Mr. Heald: We are on to a different area—changes to the way in which legislation from the Europe Union is dealt with in this place.
Clause 24, if one reads the notes, is a provision that when a Community instrument—a directive or regulation—is mentioned in a Bill, it should not be necessary to recite all the various amendments that have been made to it over the years. That is thought to be a straightforward improvement to the way in which legislation is drafted. However, I am worried about the wording. If the EU makes a directive or a regulation and then we in the UK pass a Bill, in which the EU legislation is referred to, to give it effect, but then the instrument is changed, the courts in this country would be forced, by that change, to treat the new instrument as though it were the one referred to in the Bill. In other words, are we creating an automatic change to our law every time the EU changes its provisions? That seems to go beyond the description in the notes.
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I should be grateful if the Minister would confirm that the situation is as described in the notes, and that there will be no automatic change in the law in this country, every time the Community changes its law, without reference back to the House.
Mr. Heath: I concur entirely with the point made by the hon. Member for North-East Hertfordshire—it is important that we understand the context.
As we move to this part of the Bill, may I have permission, Sir Nicholas, to ask the Minister a more general question? Clearly, there is an interrelationship between the changes that the Minister is introducing, in terms of the way in which European legislation is translated into British—I should say English—law, and the way in which the House scrutinises those matters in order to ensure that Parliament has proper control over what is enacted, either directly or indirectly.
We have been waiting a long time to hear substantial plans from the Leader of the House for improved European scrutiny. We are told constantly that they will arise soon, but “soon” never actually arrives. Will the Minister tell us what discussions his Department has had with the Leader of the House, because those two things are clearly linked? The legislative process cannot be treated in isolation from the process of European scrutiny, or vice versa. I hope that the Minister will confirm that there is joined-up government in that area and that there has been debate between the two, and I hope that he can give us an indication of whether any conclusions have been reached that ought to be brought before the House at the appropriate moment.
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