Joint Committee on Statutory Instruments Thirty-Second Report

Appendix 3

S.I. 2003/2635: memorandum from the Department for Environment, Food and Rural Affairs

End-of-Life Vehicles Regulations 2003 (S.I. 2003/2635)

1. This Memorandum is provided by the Department for Environment, Food and Rural Affairs in respect of regulation 49(1)(a) and (2) of these Regulations. The Regulations were made by the Secretary of State for Trade and Industry, whose Department drafted the bulk of them; however, Part VII of the Regulations (within which regulation 49 is found) was the policy responsibility of Defra, and consequently drafted by that Department.

2. The questions to be addressed in this Memorandum are, first, whether the charge imposed by regulation 49(1)(a) could have been made -at all- under s.2(2) of the European Communities Act 1972 ("the 1972 Act") and, second, on the validity of using section 2(2) given the existence of an alternative power to fix a charge (pursuant to section 41 of the Environment Act 1995).

3. The first question arises in the context of the Committee's apparent opinion that the 1972 Act is not to be used to impose charges, due to its characterisation of these as a form of taxation precluded under Schedule 2 to the 1972 Act. The Department has considered the contents of the Committee's Sixteenth Report of this Session and the memoranda submitted by the Department for Transport printed in Appendix 1 of that Report relating to the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 (S.I. 2003/37). The Committee doubted whether section 2(2) of the 1972 Act enabled Regulations to be made authorising the charging of fees. The Committee considered that section 56 of the Finance Act 1973 ("the 1973 Act"), which provides for the charging of fees for the provision of services or facilities in pursuance of a Community obligation, would not have been necessary if section 2(2) of the 1972 Act permitted the charging of fees, and concluded that Parliament must have been concerned at the time either that fees were a form of taxation inconsistent with the 1972 Act, Schedule 2 paragraph 1(1)(a), or that the charging of fees did not arise out of an obligation to be implemented where the relevant Community instrument was silent. As Part VII of the Regulations makes changes to the existing system of waste management licences (which function as the permits required for the treatment of waste by Articles 9 and 10 of the Waste Framework Directive (75/442/EEC)), and in respect of which charges are already levied, it is the former concern which is being addressed in this Memorandum.

4. First, it should be pointed out that, under these Regulations, fees cannot be imposed under the 1973 Act. The fees are payable to the Environment Agency. Accordingly, section 56 of the 1973 Act does not provide adequate vires for the charging provision, because section 56 concerns only fees charged by Government Departments.

History of enacting the 1973 Act

5. The Committee asked for an explanation of the reasons for enacting section 56 of the 1973 Act. The precise reasons are not clear - no assistance is provided by the debates on the Bill. However, investigation of background papers leading to its enactment (although these are, admittedly, incomplete) sheds light on its origins: at the time, the Department of Transport wished to make two types of fee: one set - of charges for individual tests designed to secure that vehicles met the standards prescribed in Directives - was considered, in the Government's view, not to constitute taxation and was thus considered to fall within the scope of section 2(2). However, there were concerns that others might constitute taxation, such as a charge for the issuing of certificates and verifications not actually required in the EC legislation. In order to be secure in the vires for these latter charges, a request was made to have a charging provision in the next Finance Act: this resulted in section 56 of the Finance Act 1973. Thus it is clear from the papers that section 56 was not meant to cast doubt on the scope of section 2(2) - it was an alternative vires which was needed for charges which might constitute taxation and fall outside the scope of the 1972 Act.

6. For completeness, it can also be noted that the first statutory instrument made under section 56 was the Goods Vehicles (Authorisation of International Journeys) (Fees) Regulations 1973 (S.I. 1973/2100). Those Regulations charge fees for implementing both European obligations and also several international agreements between the UK and other European states. This provides further illustration of the breadth of section 56 extending beyond fees relating merely to Community obligations.

7. The Department therefore accepts that Parliament, in 1973, had concerns about the point at which section 2(2) was ruled out by the reservation in relation to taxation. However, it is equally clear that there was a need at that time for a new power enabling Government Departments to charge fees in respect of a wider range of obligations.

Analysis of the 1972 Act enabling power and relevant case law

8. Since section 56(3) of the 1973 Act expressly preserved any powers apart from that section to require the payment of fees or other charges, the purposes of, and intention behind, section 56 can have no bearing on the interpretation of section 2(2). Section 2(2) should be interpreted as a freestanding provision.

9. It is established that section 2(2) confers a broad power on designated Ministers to make "any such provision (of any such extent) as might be made by Act of Parliament" (section 2(4)), subject only to the restrictions imposed by Schedule 2.

10. The question, therefore, is whether paragraph 1(1)(a) of Schedule 2, which states that section 2(2) does not include the power "to make any provision imposing or increasing taxation" alone rules out the possibility of regulation 49(1)(a). If the charge imposed in regulation 49(1)(a) imposes or increases taxation, it cannot be included.

11. Evidence (from an agricultural context) of what may have been Parliament's assumptions in enacting section 2(2) of the 1972 Act can be found in the European Communities (Designation) Order 1972 (S.I. 1972/1811), the first Designation Order made under the 1972 Act. Article 2(3) states—

12. "(3) … the designation by this Order of any Minister or government department, in relation to anything supplemental to any item in column 2 of the said Schedule [e.g. the Common Agricultural Policy], shall be taken to include designation in relation to the charging of fees in connection with any of the matters specified in that item." (emphasis added)

13. At the time of the making of the 1972 Act and the 1973 Act there appears to have been no clearly relevant authority on the meaning of 'taxation', so it is understandable that there was scope for changing assumptions on how far "taxation" extended. Nevertheless, the 1973 Act did not, as a matter of law, narrow the scope of the 1972 Act.

14. Following those enactments the first authority traced by the Department comes from the Commonwealth. Words and Phrases Legally Defined (3rd Ed, 1988) quotes persuasive material from the Australian case of Transport Authority v. Adelaide (1980) 24 SASR 481 at 485, per Wills J—

15. 'It seems to me that ... the word 'taxation' denotes all forms of general impost, however assessed, levied or collected, in contrast to charges for service rendered …' (emphasis added)

16. The 2002 supplement, in dealing with the term 'fee', quotes Canadian authority (Ontario Private Campground Assn v. Harvey (Township) (1997) 146 DLR (4th) 347 at 361-362, per Howden J) as making a clear distinction between tax and fees for services.

17. Since the Committee's 16th Report there have been three reported relevant UK cases.

18. First, in Parochial Church Council of the Parish of Aston Cantlow and Wilmcote with Billesley, Warwickshire v. Wallbank [2003] UKHL 37, Lord Scott gave an indication of the meaning of 'taxation', stating—

19. "133. ... Taxation is a levy imposed by a State, or perhaps by some core public authority authorized by the State to impose the levy, either on the public generally or on some identified section of the public. In Black's Law Dictionary, 6th ed. (1990), "tax" is described as "a charge by the government …, as a pecuniary burden laid upon individuals or property to support the government, and [being] a payment exacted by legislative authority" and whose "essential characteristics … are that it is not a voluntary payment or donation but an enforced contribution, exacted pursuant to legislative authority"."

20. Secondly, in the Court of Appeal case of Confederation of Passenger Transport UK v. The Humber Bridge Board and Secretary of State for Transport, Local Government and the Regions [2003] EWCA Civ 1842, the relevant S.I. erroneously and inadvertently omitted a bridge toll charge for a particular category (large buses) but it was manifest from the extraneous evidence that the error was inadvertent and what the charge ought to have been. The Court of Appeal interpreted the relevant S.I. as if the omitted words had been included. This may be considered as implicit support for the proposition that a fee is not a tax. Bennion's Statutory Interpretation (4th Ed, 2002, pages 725-727), records the traditional (though not conclusive) interpretative convention that a taxing enactment is similar to a penal one - i.e. nobody should be subject to it unless it is clear. Bennion quotes from the case of Ingram v. IRC [1997] 4 All ER 395 at 413, where Evans LJ stated—

21. "in the context of tax legislation it is necessary to consider the legal analysis with the utmost precision, so that the taxpayer shall not become liable to tax unless that is clearly and unequivocally the effect of the statutory provisions."

22. In the Humber Bridge case there is no indication that such a convention might stop the court reading in a charge which was not in the text of the S.I.. The Court clearly felt that the strict rules applying to interpretation of penal (and thus implicitly taxing) legislation did not apply to interpretation of legislation authorising bridge tolls for individual vehicles - see in particular paragraph 35 of the judgment. Such a toll is equivalent to a fee, and the case therefore supports the view that fees and taxes fall into different legislative categories requiring different degrees of supervision by the Courts.

23. Thirdly, attention is drawn to Kelly v Liverpool City Council [2003] EWCA Civ 197, [2003] 2 All ER 272. That case related to the right to charge for inspections of taxis under section 70 of the Local Government (Miscellaneous Provisions) Act 1967 which provides that—

24. "… a district council may charge such fees for the grant of vehicle licences as may be resolved by them from time to time and as may be sufficient in the aggregate to cover in whole or in part … [specified functions on licensing and provision of stands] … and … reasonable administrative costs in connection with the foregoing and with … control and supervision …"

25. Schiemann LJ again maintained the distinction, holding at page 277—

26. "The broad policy of the charging section is clear. The fees charged for the grant of licences are not to be used as a revenue raising measure."

27. Conclusion in relation to taxation

28. The fees charged under these Regulations are not a levy imposed on the public generally or on some identified section of the public. They are directly related to the cost of granting a permit required by European Community law.

29. The Department considers that where a provision imposes a fee directly related to a service provided, with no profit or contribution to funds used for other purposes, it does not impose or increase "taxation" and therefore falls outside the scope of the restriction imposed by paragraph 1(1)(a) of Schedule 2 to the 1972 Act.

30. The necessary inference, in the light of section 56(3) of the 1973 Act and the latest case law, is that section 2(2) and section 56 are separate but overlapping powers, and that, while section 56 is not available here, section 2(2) provides sufficient vires for the inclusion of regulation 49(1)(a).

Availability of an alternative implementing power

31. The second question concerns the Department's decision to use the general power available under s.2(2) of the 1972 Act to make the provision contained in regulation 49(1)(a) in preference to allowing the same provision to be made under the particular power contained in section 41(1)(b) of the Environment Act 1995. The latter power provides that in relation to "other environmental licences" (which include waste management licences) -

32. "… there shall be charged by and paid to [the Environment Agency] such charges as may from time to time be prescribed …".

33. Section 42 of the Environment Act 1995 sets out certain requirements before a proposed charging scheme may be presented to the Secretary of State for his approval. These include the publication of a notice, setting out the proposals, to be brought to the attention of persons likely to be affected by the scheme (section 42(1)(a)).

34. While there is a bias, all things being equal, towards using a particular power (section 41), in preference to a general one (section 2(2)), the circumstances of the present case dictated using the latter in this instance.

35. Regulations implementing Directive 2000/53/EC on end-of-life vehicles (which these Regulations now do) were required to be in place by 21st April 2002. Infraction proceedings have already been begun by the Commission against the United Kingdom in respect of non-implementation.

36. By now setting a fee for certain applications for licences (i.e. further to regulation 45(2), those from applicants operating under current exemptions from licensing, and intending to keep or treat fewer than 2,500 tonnes of waste motor vehicles per year, whose applications are required to be made before 1st February 2004 (or, in some cases, earlier)) in regulation 49(1)(a), those applications will be able to be made from the date these Regulations come into force. Had the Environment Agency resorted instead to the procedures laid down in respect of a charging scheme under section 41 of the Environment Act 1995, even if accelerated, then it was considered unlikely that the application fee could have been fixed before 1st January 2004, and applications could only have been submitted after that date.

37. Accordingly, the Environment Agency requested that this one fee for this particular group of applicants be set by the Regulations, although it proposes when next it revises the current charging scheme (in time for 1st April 2004 (the start of its new charging year), and by way of section 41 of the Environment Act 1995) to introduce a new lower fee band for new applicants who intend a small scale of operation.

38. The effect of introducing the new charge at regulation 49(1)(a) is to introduce an application fee of £650 for applicants (further to regulation 45(2)) who intend to keep or treat fewer than 2,500 tonnes of vehicles per year. Were this fee not being introduced, such applicants would otherwise be subject under the existing charging scheme for waste management licences to a fee of £1,600, which is the amount set for applicants who intend to keep or treat fewer than 5,000 tonnes per year.

39. The case of R. v. Secretary of State ex p. Orange Communications [2001] 3CMLR 36 provides authority for the proposition that where section 2(2) of the 1972 Act is used in circumstances where procedures under other legislation dealing with the same subject-matter might have given those affected wider rights (e.g. to make representations) then a specific indication of the non-use (or "disapplication") of the latter must be drawn to Parliament's attention before the use of section 2(2) shall be valid. This is done both at regulation 49(2) of these Regulations (a device which in the Orange case was recognised as available by virtue of section 2(4) of the 1972 Act), and by means of this Memorandum.

40. Precedents for disapplying alternative procedures in this way exist in e.g. the Telecommunications (Licence Modifications) (Amendment No.2) Regulations 2000 (S.I. 2000/2998), at regulation 2, and in the Dangerous Substances and Preparations (Safety) (Consolidation) (Amendment) Regulations 2002 (S.I. 2002/1770), at regulation 1(2).

7th October 2003

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