---

Legislative and Regulatory Reform Bill

I will work through the grouped amendments and the stand part clauses. I am not entirely sure what the noble Lord, Lord Norton of Louth, is trying to achieve with his amendment because it would mean that the only principle of good regulation left in Clause 23 would be the one to ensure that regulatory activity should be targeted only at cases in which action is needed. I am aware that the noble Lord chaired the Lords Select Committee on the Constitution when it produced its report The Regulatory State: Ensuring its Accountability, but I am not clear from my understanding of that report whether the noble Lord has another target in mind in moving his amendment. I am not here to defend whether the Better Regulation Task Force, now the Better Regulation Commission, accepted this recommendation from the committee, but I am here to defend the fact that all five principles of good regulation are sensible principles that should underpin regulatory activities. I challenge the noble Lord to dispute the importance of those five principles of good regulatory practice. They are widely regarded as the gold standard for judging regulation, and they are the baseline standard that our Government want to set for the exercise of regulatory functions. However, they are not unprecedented, and they can also be found in the Communications Act 2003, where they apply to the regulatory functions of Ofcom. Given the variety of functions that regulators have and the variety of contexts in which they operate, inconsistency of approach is a real risk and could cause difficulties for those regulated businesses. Would the noble Lord have it that regulatory activities should be targeted only at cases in which action is needed but that these activities are carried out in a disproportionate, unaccountable or inconsistent manner? We insist that the regulatory environment that we are trying to foster is one in which regulators do not use a sledgehammer to crack a nut, and where there is a clear understanding of accountability and the need for consistency. Regulatory activity should be targeted only at cases in which action is needed, but the action taken must be proportionate to the problem or risk involved. The noble Lord’s amendment implies that so long as you are targeting the right nut, then however you crack it is fine. I think I understand the rationale for Amendments Nos. 112B and 113A. The noble Baroness seems to require the duty to have regard to both the principles and the code of practice to be more onerous than it currently is. While I am delighted that the noble Baroness is as eager as we are that there is a statutory duty to have regard to the principles of good regulation and the code of practice in the Bill, I do not share her view that we should remove subsections (3) and (4) of Clauses 23 and 24. The effect of these subsections is that the statutory duty to have regard to the principles and the code of practice is subject to any other legal requirement affecting the exercise of the regulatory function, such as another statutory duty or Community law requirements. That means that, in the event of overlapping obligations, any other legal requirement affecting the exercise of the regulatory functions to which Clauses 23 and 24 apply takes priority over the duty to have regard to the principles and the code. That ensures legal certainty for those exercising regulatory functions. This clause is not a let-off for regulators, as was suggested in another place. Regulators will not be able to use their founding legislation to ignore the principles. They will have to have regard to the principles and the code of practice, once issued, when exercising any functions which have been listed in an order under Clause 26 wherever the exercise of the function is not already affected by a legal requirement. Where there is a conflict, this Bill will provide the Government with more tools to act and intervene. Amendment No. 113 is an unnecessary amendment, which the Government cannot accept. Philip Hampton, in his report Reducing administrative burdens: effective inspection and enforcement, recommended that the Government establish a Better Regulation Executive at the centre of Government. We accepted those recommendations in the Budget Statement in 2005. Noble Lords will know that the BRE has been established and is working with regulators to devise how best it can hold regulators to account for their performance against the principles of regulation. Alongside this assessment work of the BRE, regulators will continue to be held to account for their financial performance by the National Audit Office and the Audit Commission, and for policy by their sponsoring departments, whose decisions in this area will be assessed by the BRE. For example, following an invitation from the Treasury under Section 12 of the Financial Services and Markets Act, the National Audit Office is reviewing the economy, efficiency and effectiveness with which the Financial Services Authority has used its resources, when discharging its statutory functions. Moreover, the draft regulators compliance code, which the Government seek to place on a statutory footing under the provisions of Clause 24, proposes that regulators be required to publish clear standards for service and performance, against which they measure their performance each year, and publish the results. We feel that enough is being done to ensure that regulators are held to account with regard to the exercise of their regulatory functions and that Amendment No. 113, if accepted, would add an unnecessary layer of bureaucracy to the existing mechanisms by which the Government hold regulators to account. For those reasons, I insist, or, rather, suggest that noble Lords opposite do not press their amendments. For many of the reasons that I have set out, we would also oppose the removal of Clauses 24, 25 and 26. The code of practice procedure is important. The Minister must follow particular requirements when proposing to issue or revise the code of practice. The procedural requirements are broadly similar to those in place for revising the code of practice set out in Section 10 of the 2001 Act. Clause 26 enables a Minister of the Crown to specify by order which regulatory functions are functions to which the duties have to have regard to the principles in Clause 23 and the code of practice in Clause 24 and its application. We welcome the general support that we have had from opposition parties, but I would draw to the attention of noble Lords opposite the importance of Clause 26, which ensures that the Minister or the Assembly must consult any persons whose functions are to be specified in the order made under that, and consult other persons as the authority making the order considers appropriate. An order made under this power must be made by statutory instrument, and where the Minister makes the order, it will be subject to the affirmative resolution procedure, by virtue of subsection (9). Clause 26 stands or falls with Clauses 23, 24 and 25 and will enable us to deliver the recommendation of Philip Hampton’s report through changing the way in which regulators behave. For those reasons Clause 26 should stand part of the Bill. The noble Baroness asked why the detail of the code is not on the face of the Bill. We have produced an initial draft of the code. We are working with regulators on its detail and it is subject to change. So we require that flexibility in order to be able to change it—very much having listened to the views of formal consultees. Formal consultation on the code will take place after Royal Assent but that does not diminish our commitment to ensuring that we pay careful attention to the representations made to us.