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Legislative and Regulatory Reform Bill

My Lords, this is the second amendment on economic regulators tabled by the noble Baroness, Lady Wilcox, and, as she acknowledged, it bears a close resemblance to the amendment on economic regulators tabled by the noble Lord, Lord Norton of Louth, and my noble friend Lord Berkeley. Despite the refinement of the noble Baroness’s amendment, the Government remain of the opinion that an amendment on the independence of economic regulators is unnecessary. I set out the reasons for that in Committee, but I am happy to reiterate them for the benefit of noble Lords. We have reflected on that debate to see whether we can provide further assurance to noble Lords. As the noble Baroness, Lady Wilcox, stated in Committee, and as this amendment seeks to install within the Bill, "““independence and jurisdiction … are essential if we are to ensure that private investors will have sufficient confidence in the regulatory system””.—[Official Report, 19/7/06; col. 1332.]" I agree. This Government are ensuring private investment confidence, and the UK is seen by private investors as one of the best places for companies to start, invest, grow and expand. In fact, according to the recent OECD report, Trends and Recent Developments in Foreign Direct Investment, the UK was the world’s largest recipient of inward foreign direct investment in 2005, attracting £91 billion of FDI, the largest inward direct investment ever recorded in the UK. Furthermore, the World Bank’s Doing Business 2007 report ranked the UK sixth, out of 175, in the world and first in the EU for ease of doing business. These statistics alone should provide sufficient confidence to private investors. However, the question this House must ask is: did the Regulatory Reform Act 2001, from which the economic regulators were not excluded, impinge on their independence and jurisdiction? The answer is no. The House must also ask: did the 2001 Act deter private investment in the UK? Given the World Bank and OECD reports just mentioned, the answer would have to be: no. The noble Lord, Lord Norton of Louth, suggested that that was because the powers had not yet produced that impact, but I thought the argument was that their existence created the problem. The existence of those powers in 2001 has clearly not created the problem. Finally, one might then ask: will this Bill, once enacted, deter private investment, on the basis that investors will see the order-making powers as a potential power to disrupt the market? On the contrary, the order-making power gives confidence not just to the private but also the public and voluntary sectors that this Government are serious about reducing or removing unnecessary burdens on those sectors. Clause 1(3) makes explicit that one of the Bill’s objectives is to remove obstacles to ““efficiency, productivity or profitability””. Given that the Government recognise that investment is one of the main drivers to productivity, they would be extremely unlikely to make, under this Bill, any proposal that would jeopardise productivity through pursuing proposals that would undermine investor confidence. Parliament would also be likely to take a dim view of any such proposal. This House should be asking itself: will this Bill, once enacted, provide an effective vehicle for cutting red tape? After two previous Acts I hope that this House can be confident in itself to reply in the affirmative. I was surprised by some of the debate in Committee, which seemed to suggest that, using this Bill, Ministers could amend the regulatory structure on a whim—for example, by removing the chairman of an economic regulator—and as though Parliament had no say whatever in the process. That concern is clearly behind proposed subsection (4) of the amendment. Noble Lords will of course be aware that this Bill has more stringent safeguards than the 2001 Act and includes an absolute and unrestricted right of veto for Parliament. Ministers cannot act on a whim. They will also be aware that every order is subject to a statutory consultation process, which requires the Minister to consult such organisations and persons that appear to be representative of interests substantially affected by the proposals, including any body, such as a regulator, whose functions would be affected by the proposed order. The consultation will provide the regulator and industry with an opportunity to make their views known. That point was pursued by the noble Lord, Lord Bradshaw. I hope that he is satisfied on that, and that it is absolutely clear. The results of this consultation will influence both the Minister and Parliament in reaching a decision on the content of the draft order and the appropriate level of Parliamentary scrutiny of it. The results will also influence whether Parliament wishes to approve the order, or whether it exercises its right to veto it. Furthermore, the preconditions in the Bill and the statutory consultation provisions are not requirements for making primary legislation, the availability of which, in itself, does not lead to regulatory uncertainty or act as an obstacle to private investment. The procedural and substantive safeguards for any order should provide the reassurance that economic regulators and their respective markets need that changes to the regulatory structure cannot be made on a whim. In addition to that certainty, the Government have said throughout the parliamentary passage of this Bill that it is not our intention to erode the independence from the Government of those regulators set up by statute. I hope that that reassures the two noble Baronesses who have pursued that point. This House will, of course, also be aware of the Government’s undertaking not to deliver highly controversial proposals by order. If a Minister decided to pursue an order in the face of vocal and evidence-based opposition from a regulator—or, indeed, from the regulated, whom we must not forget—this undertaking would also influence whether Parliament wished to approve the order or whether it chose to exercise its right to veto it. In addition to the protections provided in the Bill, I reiterate that businesses that are being regulated must have the right to raise concerns if economic regulators are carrying out their functions, for instance, overly bureaucratically. If there are sound reasons for suggesting any modification of their statutory functions for the purposes of removing or reducing burdens, or of modifying how those functions are carried out, it should be possible to address these by order, as it would be possible for any other regulator. I ask noble Lords why we should not seek to make that distinction. There should be a level playing field.