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Legislative and Regulatory Reform Bill

I wish to speak to Amendment No. 47B in the same group. When I chaired the Constitution Committee of your Lordships’ House, the committee looked at the role of the independent regulators appointed by statute. In particular, we looked at the relationship between accountability and independence. Regulators have to be independent to do their jobs and that requires Ministers giving up some freedoms to protect the decision making of regulators. At the same time, regulators have a duty to explain, to be exposed to scrutiny and to be subject to the full rigours of the possibility of legal challenge. They have to fulfil their statutory duties. The independence of regulators, as my noble friend has already said, is crucial. It is important that independence is seen to exist. Perhaps I may quote from paragraph 121 of the committee’s report: "““Our evidence suggests once again the broad range of support that underpins a regulatory framework that separates ministerial roles and responsibilities from those of independent regulators, and that this fact should be well communicated on a regular basis by Government. Water UK, for example, told us that ‘For Ministers and regulators frequently to reassert the independence of the regulator on economic decisions is helpful; and, after all, we had a survey of investors recently and 96 per cent of them said that they regarded the independence of the regulator as being very important, so just a frequent reassertion of it would be helpful’””." It was also clear from our evidence that, on the whole, Ministers welcomed and supported that independence. They saw that the independence of regulators is a vital ingredient in maintaining consistency, for ensuring that regulatory decisions are taken by competent authorities—which, as we noted, accords well with current and prospective developments in the European Union—and for promoting confidence about regulation among those investing in regulated industries, as well as customers on whose behalf it is carried out. It is also extremely important for promoting confidence among those bodies that are regulated. In evidence to the committee, the Department of Trade and Industry said that, "““the independence of economic regulators from Government—insulating decisions from short term political factors—is a fundamental contributor to regulatory certainty and prerequisite for continuing to attract private finance to regulated sectors””." The independence of economic regulators is thus recognised as crucial and as the report stressed, it is not at the expense of accountability. On the whole, we found that Ministers recognised and welcomed that independence. That brings me to the provisions of the Bill. The amendment moved by my noble friend Lady Wilcox seeks to protect the functions of the economic regulators. My amendment is designed to probe the Government about what they intend to do to protect the independence as well as the jurisdiction of the economic regulators. As my noble friend has said, some of the economic regulators have concerns that the provisions of the Bill could be used to amend the statutes creating them and the framework within which they operate. Orders could be used to constrain their jurisdiction or to limit their independence. As my noble friend Lady Wilcox said, and as she argued at Second Reading, it is not a hypothetical possibility. She mentioned the clash between the Transport Secretary and the rail regulator in 2001 which showed that in exceptional circumstances a Minister may try to limit the independence of a regulator. Thus, there is a need to protect the independenceof the economic regulators and—picking up onmy earlier point about reassertion of that independence—to be seen to be doing so. There needs to be a change to the Bill to reassure investors as well as the regulated bodies that that independence will be protected and that it will not be subject to the possibility, at any time, of a Minister deciding to use the order-making power to get round the decision of a regulator. My amendment is designed to cover independence as well as jurisdiction in order to prevent a Minister transferring the functions of a regulator to another agent. The regulatory powers have to stay in the hands of the independent regulator. Like my noble friend Lady Wilcox, I have no doubt that the Minister will reiterate the Government’s commitment to the independence of the economic regulators and say that there is no intention to use powers in the Bill to affect their independence. The problem, as has been variously reiterated in our debates, is that the Minister's words cannot bind a future Government. The need for an amendment is especially crucial in this case to demonstrate that the Bill cannot be used for that purpose. This Bill brings into being the sword of Damocles. It needs to be removed.