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Legislative and Regulatory Reform Bill

My Lords, in supporting this amendment, I wish to reiterate two points that I made in Committee. It is important to stress the independence of the economic regulators and the fact that that independence is not achieved at the expense of accountability. Regulators have to explain and justify their actions. In the Constitution Committee’s report The Regulatory State: Ensuring its Accountability, the point was made that regulators are subject to what was termed ““360 degrees of accountability””. They are answerable to a range of bodies, including Parliament. They are bound by statute and can be challenged if they exceed their powers. Stipulating the independence of regulators does not affect the powers of Ministers to determine policy. The importance of maintaining the independence of regulators has been variously stressed, including by the Government. In Committee, I quoted from the evidence submitted to the Constitution Committee by the Department of Trade and Industry. The department 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””." There is thus a compelling case for protecting the independence of regulators—and to be seen to be so doing. That was the case that I advanced in Committee, and my amendment is designed to ring-fence that independence. I listened with care to the Minister’s response in Committee. His reasons for opposing the amendment were twofold. One was that the provisions of the Bill did not create a new position. Regulatory reform orders under the 2001 Act could be used to change the functions of the economic regulators and the provisions of the Act, he argued, had not led to any uncertainty. The second point was that the provisions allowed for flexibility subject to parliamentary scrutiny. The first point I do not find compelling. I was a critic of the 2001 Act, and the fact of carrying over existing provisions is no commendation. It has not led to market uncertainty because the powers have not been used in a manner that is contentious. My fears about the provision are more apparent if I rephrase that and say that the powers have not yet been used in a manner that is contentious. If the order-making power were to be employed to try to limit the independence of regulators, it may be blocked by Parliament, but the damage would already have been done. If tried once, the potential is always there, and markets thereafter may be far more wary. The point that has been variously stressed, not least by my noble friend Lord Onslow, and which the Government appear to have difficulty in accepting, is that a Government cannot bind their successors. The other point developed by the Minister is essentially one of convenience. He cited an example affecting the FSA. I counsel against generalising from an N of one, which seems to have happened an awful lot in discussing this Bill. I am not sure that we should concede the general point of enabling primary legislation to be amended by secondary legislation because there is one example of that proving useful. The potential for creating even one case of misuse should concern us. The Minister’s argument, which is at the heart of what I find worrying about the Bill, is that because circumstances change, there may be a case for changing the functions of the regulator and this could conveniently be done by secondary legislation. In other words, it is an admission that we did not get the legislation right the first time round. Had we done so, there would have been appropriate provision in the Act for amending regulatory functions. We need to think through what this may entail for the Government’s approach to primary legislation in future. I revert to the point that I made earlier. I believe that it is important to protect the independence of regulators and to be seen to be doing so. That combined with my somewhat purist view of primary legislation means that I am very happy to support my noble friend’s amendment.