---

Legislative and Regulatory Reform Bill

My Lords, as the Minister has said, this Bill has arrived in this House in a considerably better state than when it arrived in the other place. We on these Benches are grateful to the Government for listening to the concerns voiced by many parliamentarians, led by the noble Lord, Lord Grocott, who warned that the wide-ranging powers initially proposed in the Bill would far exceed the bounds of what would be constitutionally acceptable to this House. As a result of the concessions that the Government made in the other place, we now have what is tantamount to a fresh Bill to be considered by your Lordships’ House. The other place had precious little time to consider the new government amendments, and some parts of the Bill received little or no attention at all, so the onus is all the more on this House to scrutinise it extremely carefully. The House will do that against a background of the deepest suspicion about where the Government are coming from. If the Bill team had spent a fraction of the time on deregulation that they spent on constructing the Bill and then pulling it to pieces, right now we would be much better off. Deregulation comes down to, ““Don’t just talk about it; get on and do it””. The trouble is that this Government just do not do that. Removing burdens from business is critical if this country is to retain a competitive edge over other countries in today’s globalised economy. I cannot help but feel rather circumspect about whether this Bill really signifies a new dawn of deregulation from this Government. It is all very well producing a mechanism to deregulate, but unless that is accompanied by a fundamental change of culture in Whitehall departments to reduce the amount of new regulations produced, it will achieve very little. The proof of the pudding will be in the eating, and since 1997 the pudding cooked up by this Government has got bigger, heavier, stodgier and terrifyingly more costly every year. Since 1997 we have heard about the launch of the Better Regulation Task Force, regulatory impact assessments, the Chancellor’s Better Regulation Action Plan and the establishment of the Better Regulation Executive. One can produce as many initiatives as one likes, but the measure of success is proved only by the effect on the ground. The British Chamber of Commerce’s burdens barometer estimates that the cost of new regulations introduced on business since 1997 now totals £50 billion, up from £39 billion a year ago. On average under this Government, regulations are introduced at the rate of 15 a day, a far higher rate than under the previous Government. The World Economic Forum says Great Britain has fallen from fourth to 13th in the list of the world’s most competitive countries. When you talk to the business community, particularly small businesses, it is clear that the burden of regulation is one of the main problems it has to contend with when trying to maintain its competitiveness. When on average something in the region of 3,800 regulations are passed annually, one can see that deregulation is only a small part of the equation. The real solution lies in cutting down the amount of regulation produced in the first place. As Sir David Arculus said last December when he stood down as chairman of the Better Regulation Task Force:"““Bad regulations are like moles on the lawn . . . While you are dealing with one, a dozen more are appearing behind your back. The best way to stop bad regulation . . . is to dig down to the root of the problem””." He also highlighted the huge cost of regulation, which he said exceeds £100 billion. He estimated that a third of that was probably administrative costs. It is encouraging that the Government accepted his recommendation that they should embark on a project to measure the administrative costs of regulation and set up a public target for reducing them. I would welcome an update from the Minister on how far that work has progressed. I have always felt that this Government purposefully learnt the language of business to win the election, but that they have never understood its heartbeat. Creating initiatives and setting up the statutory structures for quick regulatory reform of over-burdensome regulations looks good—and no doubt gives the Minister something tangible to go back to the Prime Minister with, to show that his department is ““delivering””—but I suspect it is far harder, and perhaps beyond the reach of statute, to actually get into the weeds of every department and change the culture of regulation. That is down to the managerial and political determination of the individual Minister. Every Minister should have on his desk a sign saying, ““Just say no””; it is allowed, and it is possible. Civil servants are quite right to advise that there may be risks, but it is for a good Minister to see the dangers and have the real political wisdom of trusting to common sense and leaving some things well alone. Perhaps if the Government had focused more on the internal processes and administration of their departments rather than churning out headline-catching legislation, they would not have found themselves in the mess they are in now with the Home Office and the National Health Service. I have concentrated so far on the effect on business of over-regulation because the Bill at least presents a step in the right direction towards delivering a lighter regulatory burden on business, and we must not lose sight of that. However, its potential to deliver more and swifter deregulatory measures is hard to gauge. It would be useful to hear from the Government during the forthcoming debates on the Bill some concrete examples of which regulations they would like removed. We have had 44 government Bills this Session. How many of them have deregulated? How many regulations have gone? Every one of those Bills could have had a whole part devoted to deregulation and, at least, both Houses could have amended and improved them. It would also be useful to get some confirmation of the numbers of regulatory reform orders that the Government envisage would be passed under the new order-making powers of the Bill. Under the Regulatory Reform Act 2001, the Government seem to have managed only about 28, according to the figures in their regulatory impact assessment to the Bill published today. That was despite a far higher target being set. We wait with anticipation to hear what the new targets will be, once Ministers have these new powers. If we apply a cost benefit analysis to the Bill, its potential benefit and effectiveness are hard to predict, since they are reliant on the political will of Ministers to take advantage of the Bill’s powers and use them effectively. But the cost in constitutional terms is easier to see: the Bill risks reducing the ability of Parliament properly to scrutinise measures that will amend primary legislation. The constitutional risks of the Bill are now somewhat reduced, but having removed the sting from the Bill, some of the poison still remains. We agree with the view expressed by the Select Committee on the Constitution at paragraph 45 of its report that,"““additional safeguards can be introduced to protect matters of constitutional importance without undermining the policy goals of the bill””." In particular we hope to examine carefully, to see whether we can improve, the parts of the Bill that define the operation of ministerial power and permit the sub-delegation of power. Very weighty concerns have been raised about the potential application of the Part 1 order-making powers to the principal economic regulators—that is, the ones with the greatest powers in energy, telecommunications and broadcasting, water and railways—and the overall competition authority, the Office of Fair Trading. Part 2 sets out principles that should be adhered to when a person exercises regulatory functions. It then specifically excludes the principal economic regulators. That is right, because the principal economic regulators already adhere to and espouse all the principles that Part 2 seeks to promote. Part 2 is for the smaller, less significant regulators, and that is how it should be. But the rightful exclusion of the principal economic regulators from Part 2 throws into sharp relief the fact that they have not been excluded from Part 1. Yet Part 1 is by far the more significant part. It allows the Minister, after cursory and highly abbreviated parliamentary procedure, to alter by administrative fiat fundamental parts of the constitutions of the principal economic regulators. As was pointed out last week by the chairman of the Office of Rail Regulation, Part 1 could be used to diminish or even extinguish the independence of the principal economic regulators. It could also be used to alter their jurisdictions, for example by transferring critical parts of them to other non-independent—that is, politically controlled—agencies of the state. This is no idle or academic point, and the adverse consequences of the use of such powers may be very significant. It happened—or rather, it very nearly happened—when the Government found in 2001 that, to carry out their plans to put Railtrack into administration, they had to contend with the independence and jurisdiction of the Rail Regulator, the statutory predecessor of the Office of Rail Regulation. I need not remind the House of those events, but the political determination to destroy the independence of the regulator was firm and we should always remember that. What this regrettable and disgraceful incident shows is that a Government—this Government—could and did manifest their intolerance of the independence and jurisdiction of one of the essential supports of a privatised industry in this way. The then Rail Regulator published his commentary on this Bill in an article in the Financial Times in March this year. He referred to the threats of neutralising legislation in these terms:"““When in 2001 the then Transport Secretary improperly threatened me with legislation to remove my independence as Rail Regulator, it was the rigour and timescales of the Parliamentary process which offered the most potent protection. He simply could not do it in time, and had to resort to other equally controversial measures to get his way in the collapse of Railtrack. If the Legislative and Regulatory Reform Bill had been enacted at that time, the juggernaut of executive government would have had considerably more power to be rid of an inconvenient part of the constitution””." This is a very significant issue. Private investors depend heavily on those regulators being beyond political control, taking decisions on the companies’ investment programmes, price controls, access to their networks and so on against objective public interest criteria set down in their founding statutes, without regard to ministerial intervention or short-term political whims. Investors know that if their regulators’ roles, statutory duties or constitutional positions are to be altered, such a fundamental change must first go through the full process of parliamentary scrutiny and be properly and openly debated. They know that something so great in its significance cannot be steamrollered through, and that the ambitions of a control-obsessed Executive can and should be tested and checked in a considered and proportionate way. That is how it should be. We should never allow it to be otherwise. The Government are well aware of the Official Opposition’s concerns about the provisions relating to the implementation of Law Commission proposals. The Government blame the lack of legislative time to get Law Commission proposals on to the statute book. But ultimately that is a problem of the Government of the day’s priorities and not necessarily a reason to sacrifice proper parliamentary scrutiny of any proposals introduced by primary, rather than secondary, legislation. There are other lingering doubts over the order-making powers in Part 1, for example whether they are appropriate for consolidatory and codifying measures. In this matter and indeed on the whole question of the appropriateness of the proposed powers in Part 1, this House will find the 20th report of the Select Committee on Delegated Powers and Regulatory Reform an invaluable guide. I feel that it is right to give notice to the Government that we shall pursue its comments in Committee. There are further concerns about the procedure contained in Clauses 13 to 19, by which any order is approved by Parliament. We will look to ensure that these orders are guaranteed the correct scrutiny they deserve by Parliament, and whether the so-called veto, which is in fact a mere recommendation, that can be exercised by a committee over a draft order is strong enough. I welcome the Minister’s indication that the Government will accept the recommendations of the Delegated Powers and Regulatory Reform Committee regarding fettering the discretion of the committee to consider a draft order. We hope the Government will go further and accept all its recommendations. Part 3 relates to the implementation of European Community obligations. We will examine carefully whether more can be done to limit the practice of gold-plating in the implementation of European regulations and directives. I am sure that the Government and the Opposition both agree that regulations should contain no more than is absolutely necessary when implementing EU directives, and I would be interested to hear from the Government what steps they suggest to achieve this. In conclusion, we support attempts by the Government to ensure that deregulation can be achieved swiftly and efficiently. We owe it to the economic well-being of this country to get the regulatory culture of Whitehall changed for the better, and if this Bill proves to be a useful tool to achieve that so much the better. But the right balance has to be struck between achieving those aims and ensuring that Parliament still maintains effective scrutiny and control of any draft orders introduced by Ministers. The Bill is not yet in a fit state to be passed by this House, but we hope that the Government will continue to listen so that by the time it leaves here, it will do so as a constitutionally sound but effective deregulatory weapon.