Select Committee on Delegated Powers and Deregulation Eleventh Report


ELEVENTH REPORT

4th February 1998

  By the Select Committee appointed to report whether the provisions of any bill inappropriately delegate legislative power, or whether they subject the exercise of legislative power to an inappropriate degree of parliamentary scrutiny; to report on documents laid before Parliament under section 3(3) of the Deregulation and Contracting Out Act 1994 and on draft orders laid under section 1(4) of that Act; and to perform, in respect of such documents and orders, the functions performed in respect of other instruments by the Joint Committee on Statutory Instruments.

DATA PROTECTION BILL [HL]

Introduction

  1.    The principal purpose of this Bill is to implement the EC Data Protection Directive[1] and to add further protection to that provided by the Data Protection Act 1984, which the Bill repeals. It extends data protection controls to cover certain manual, as well as computerised, personal data; attaches conditions to processing, including additional ones for sensitive data; strengthens individuals' rights, in particular the rights to be told about processing, to obtain copies of data and to secure judicial remedies; and replaces registration with notification.

  2.    In examining the Bill the Committee first considered - as it does with all bills containing delegated powers - whether the grant of secondary power was appropriate.[2] With the potential exception of clause 28(4), to which we return later, in each instance we concluded that it was. We then followed our usual practice of considering the delegated powers one by one.

  3.    Clause 60 states the procedure for the making of orders, regulations and rules under the Bill. The Home Office memorandum explains that the Directive permits Member States a considerable amount of discretion and in the context of, for example, the new notification system, the Bill takes full advantage of this discretion, leaving the detail of the scheme to be set out in notification regulations.[3] The memorandum, which is exceptionally helpful, provides a commentary on all the delegated powers contained in the Bill and this report deals only with those which raised particular issues which the Committee considered in detail. There are six delegated powers subject to affirmative procedure, instruments under four powers have to be laid before Parliament after being made, the commencement power is not subject to Parliamentary control and the remaining powers are subject to negative procedure.


Affirmative Powers

  4.    There are affirmative powers in clauses 9(2)(b), 21(1), 28(4), 29 and 37 and paragraph 9 of Schedule 3. In each case the memorandum justifies affirmative procedure by reference to the significance of the power having regard to the impact its exercise could have on those affected. In some instances there is a corresponding power in the 1984 Act which is subject to affirmative procedure.

  5.    The Home Office memorandum states clearly that the affirmative resolution procedure has been chosen where orders would, or might, restrict the rights of data subjects (see especially paragraphs 17, 18, 19 and 21 of the memorandum). The Committee agrees with this judgment about the appropriate Parliamentary control. As the Home Office also states in its memorandum (paragraph 30), the first data protection principle, and one of the fundamental concepts of any data protection regime, is the requirement for personal data to be processed fairly and lawfully. The Committee considers that the affirmative procedure is necessary in each of these instances to protect the rights of the data subject, particularly since the restriction of those rights is contrary to the normal intention of the bill.

  6.    The order-making power in clause 28(4) is one of the most controversial elements of the bill. It gives the Secretary of State an apparently unlimited power to exempt personal data of a specified description from the data subject's right of access to personal data (section 7) and from the requirement to process personal data fairly and lawfully (set out in paragraph 1 of Schedule I to the Bill).

  7.    As the Minister acknowledged during the Second Reading debate on this bill, there is a particularly difficult balance to be struck with this power, about which the Data Protection Registrar has expressed her concern. The exemption in clause 28(1) is limited to the contexts of crime and taxation, but is expressed in very wide terms as applying "in any case" in which the application of the provisions in question would be likely to prejudice any of the matters specified. The need for the power in section 28(4) to create additional exemptions is not immediately apparent, and indeed the Minister told the House that the Government had "made no firm decisions about its use".[4] It is not easy to see what clause 28(4) adds which is not covered by clause 28(1). The obvious differences are the contrasts between "in any case" and "personal data of a specified description" and between "likely to prejudice any of the matters mentioned in this subsection" and "required for any of the purposes mentioned in subsection (1)". The Committee was grateful for the explanation in the explanatory memorandum that "it is understood that it may be necessary in some circumstances, in view of the importance of the purposes set out in clause 28(1), to disapply those provisions otherwise than on a case by case basis".

  8.    The Committee understands the case for giving the Secretary of State power to grant some limited exemptions to section 7 and the non-disclosure provisions in respect of descriptions of data in order to avoid the commission of crime and to assist in its detection. That point was made by the Solicitor General during the Second Reading debate,[5] and underlies clause 28(1). Of far greater concern is the wide-ranging power under clause 28(4) to grant exemptions from the requirement to process personal data fairly and lawfully (the first data protection principle). This principle goes to the heart of the Bill, and the Committee views with the greatest concern the scope of this provision. If the power remains in the Bill as it is currently drafted, there will be no limits to the inroads which could be made into the fundamental requirement that personal data be processed fairly and lawfully - a power which in the Committee's view it would be impossible to justify. The House will no doubt wish to consider these issues with the greatest care during the Bill's subsequent passage and may wish to amend the Bill to remove the general power to grant exemptions from the first data protection principle.

Automatic decision-taking

  9.    Clause 13 places a limitation on processing by giving a right to the data subject not to be subject to certain decisions "based solely" on automated processing. Power is, however, given to the Secretary of State by clause 13(5) to disapply by order the limitation contained in clause 13(1) in other specified circumstances. The memorandum states that "the exercise of this power will of course be circumscribed by the Directive's stipulations as to safeguards." It justifies the application of the negative resolution procedure on the grounds that "the general prohibition on automated decision-taking is itself somewhat in the nature of a procedural safeguard for data subjects."[6]

  10.    In the Committee's view, it would be possible for this power to operate substantively rather than procedurally. Furthermore, automated processing is increasing rapidly, and is likely to continue to do so as developments in computer technology continue to push areas of the law into hitherto uncharted territory. The Committee has earlier welcomed the Government's use of the affirmative resolution procedure for orders which would restrict the rights of data subjects.[7] Taking all these considerations into account, the House may consider that the Bill should be amended to make the power in clause 13(5) subject to the affirmative resolution procedure.

Notification regulations

  11.    Clause 15(2) defines "notification regulations" as regulations made under Part III of the Bill other than regulations about fees. Part III is concerned with the notification to the Data Protection Commissioner (at present the Data Protection Registrar) of particulars of data controllers. These regulations are subject to negative procedure. The memorandum points out that the power under section 4(8) of the 1984 Act to vary registration particulars is subject to affirmative procedure and justifies the lower level of Parliamentary scrutiny of notification regulations by reference to the difference in character between the old regime and the proposed new regime, in particular the fact that notification particulars will no longer trigger direct controls on processing. The Committee does not see section 4(8) as a relevant precedent. That power is close to being a Henry VIII power as it allows the Secretary of State to "vary the particulars to be included in the register" when section 4(3) sets out a list of particulars which are to go in the register. But given the close supervisory role of the Data Protection Commissioner in this area, the Committee sees no reason to suggest that affirmative procedure would be more appropriate for notification regulations.

Fees

  12.    There are powers to prescribe the fees or the maximum fees that can be charged under the Bill. These powers are in clauses 7, 17(5) and 18(4) and (7). The power under clause 7 extends also to prescribing the maximum fee that can be charged under the Access to Health Records Act 1990 and the Access to Health Records (Northern Ireland) Order 1993 (see the amendments in Schedule 10, page 56, of the Bill). These powers are not subject to Parliamentary control but instruments have to be laid before Parliament after they have been made. The Committee is satisfied that these arrangements are appropriate.

Recommendation

  13.    The House will wish to consider carefully the need for the order-making power in clause 28(4). It may also wish to consider the case for amending the bill to make the power relating to automatic decision-taking in clause 13(5) subject to the affirmative resolution procedure. There is nothing else in the Bill to which the House's attention need be drawn.

BANK OF ENGLAND BILL

Introduction

  14.    This Bill makes major changes to the constitution and functions of the Bank of England.[8] The Bill confers on the Treasury power to make orders (clauses 17(4) and (5), 19, 23(2), 33(1) and 45 (commencement) and Schedules 2 (paras 1(2) and 2(2), 5 and 8) and 4 (paras 1(5) and 3(7)). Parliament is given "affirmative" control over orders under clause 17(4) or (5) or 19 or paragraph 1(2) or 5 of Schedule 2. Parliament has no control over commencement orders or orders under paragraph 3 (7) of Schedule 4. The Financial Services Authority's power to prescribe banking supervision fees is discussed below as are the powers delegated to the Treasury which raise issues of interest to the Committee.

Henry VIII powers

  15.    Clause 17(5) allows the Treasury to amend clause 17(3) which specifies the institutions which the Bank can compel to provide information. This power is no doubt needed to meet changing circumstances and the Committee considers that the affirmative procedure provided should give appropriate control. Clause 17(6) requires prior consultation.

  16.    Clause 33(5)(b)(i) allows an order under clause 33(1) to amend or repeal an enactment in any Act, wherever passed (there is a similar power to amend statutory instruments). Clause 33 is concerned with the closure of the National Savings Stock Register to gilts. While the clause establishes the policy, it is left to the Treasury to give effect to it by order. An order under the clause is subject to negative procedure in the Commons only. In the Committee's view the narrow compass of the clause and the fact that the important decisions will have been taken by Parliament in passing the clause make negative procedure appropriate even for the Henry VIII power. As the clause is concerned with Government borrowing arrangements it is appropriate that the control should be given to the Commons only.

  17.    Paragraph 1(2) of Schedule 2 allows the Treasury to amend paragraph 1(1) which specifies the "eligible institutions" which have to maintain cash deposits with the Bank. Again the affirmative procedure provided appears to give appropriate control.

  18.    Paragraph 8 of Schedule 2 allows the Treasury to amend or replace paragraph 7 which specified the benchmark rate of interest which determines how much an eligible institution has to pay the Bank under paragraph 6(3). This power is subject to negative procedure. The Committee considers that negative procedure is appropriate for this Henry VIII power.

  19.    Paragraph 3(2) of Schedule 7 allows the Treasury by order to amend the Table set out in paragraph 3(1). That Table lists the authorities to which the Bank can disclose information notwithstanding the general prohibition in paragraph 1(3). Information can only be disclosed to such an authority to assist it with the discharge of such of its functions as are specified in the Table. The power to amend the Table is potentially wide, and the appropriate degree of parliamentary control depends on the uses to which it will be put. The House may wish to consider whether it is not of such significance as to justify amending the Bill to provide for the affirmative resolution procedure, rather than the negative procedure currently proposed in the Bill.

Other affirmative powers

  20.    Clause 17 gives the Bank power to obtain information. The institutions subject to this power are specified in subsection (3) (see the note on clause 17(5) above) and subsection (4) gives the Treasury power by order to determine what financial affairs of such an institution are subject to inquiry under the clause. The power is subject to affirmative procedure because of its importance and apparent width.

  21.    Clause 19 gives the Treasury reserve powers to make orders giving the Bank directions with respect to monetary policy. This power includes making consequential modifications of the provisions of Part II of the Bill relating to the Monetary Policy Committee (see clause 13). An order under this clause has to be laid after being made and ceases to have effect after 28 sitting days unless approved by both Houses. This is the common "emergency procedure" and seems appropriate here - the power can only be used in "extreme economic circumstances" (subsection (1)). An order suspends the operation of Clause 11 (which states the monetary policy objectives of the Bank).

  22.    Paragraph 5 of Schedule 2 allows the Treasury to specify for the purpose of paragraph 4 (calculation of deposits required from eligible institutions) "value bands and the ratios applicable to them". Presumably the importance of these to the City makes affirmative procedure appropriate.

Schedule 4

  23.    Clause 21 transfers certain functions (mainly regulatory) of the Bank to the Financial Services Authority. Schedule 4 contains the supplementary provisions about the transfer of staff, property, rights and liabilities. Paragraph 1(5) gives the Treasury power by order to make transitional provisions. This power is subject to negative procedure and does not call for comment. Paragraph 3 requires the Bank to make a scheme for the transfer to the Authority of "such of the Bank's property, rights and liabilities as appear to the Bank appropriate to be so transferred in consequence of the transfer of functions ....." A scheme requires the consent of the authority (paragraph 3(3) and the approval of the Treasury (paragraph 3(2)). Approval is given by order (paragraph 3(7)) and the Treasury may modify the scheme (paragraph 3(4)) or make a scheme (in the circumstances set out in paragraph 3(6)). An approval order is a statutory instrument but is not subject to Parliamentary control. This seems appropriate for the subject matter.

Banking supervision fees

  24.    Schedule 6 allows the Financial Services Authority to charge fees in connection with its supervisory functions. It is left to the Authority to fix the amount of the fees and when they are to be paid. This the Authority is to do by regulations. Paragraph 2 requires the Authority to consult before making regulations, paragraph 3 states that the regulations are to be made by an instrument in writing and paragraphs 4 and 5 deal with the publication and proof of regulations. The fixing of fees is the exercise of a delegated legislative power but the instrument containing the fees regulations is not to be a statutory instrument. The Committee considers this acceptable as the fees are to be such as will cover the Authority's costs (paragraph 1(3)) and those who will have to pay are to be consulted. If the Authority abused its power to make fees regulations, it would be subject to judicial review.

Recommendation

  25.    There is nothing else in the Bill to which the House's attention need be drawn.

EUROPEAN COMMUNITIES (AMENDMENT) BILL

  26.    There are no delegated legislative powers in this Bill.



1  
Directive 95/46/EC of the European Parliament and the Council on the protection of individuals with regard to the processing of personal data and on the free movement of such data. Member States must have legislation giving effect to this Directive in place by 24 October 1998. Back

2   This includes expressing a view on whether the power is so important that it should only be one granted by primary legislation. See paragraph 13 of the Committee's Special Report for last session (HL Paper 72, session 1996-97).  Back

3   Explanatory memorandum, paragraph 7. Back

4   HL Deb., 2 February 1998, col. 441. Back

5   HL Deb., 2 February 1998, col. 477. Back

6   Paragraph 6. Back

7   Explanatory memorandum, paragraph 17. Back

8   The Chairman of the Committee, Lord Alexander of Weedon QC, having declared an interest in the subject matter of this Bill as Chairman of National Westminster Bank PLC, took no part in the Committee's deliberations on the Bill. In his absence for the relevant part of the Committee's meeting on 4 February, the Lord Dean of Harptree took the Chair. The Committee considered that it would be for the convenience of the House if it were to report before the second reading of this Bill. In such circumstances, we would expect to report on the Bill for a second time if the second reading debate raises issues which the Committee would have wished to take into account. Back


 
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