Clause 19 - principles
Legislative and Regulatory Reform Bill
9:00 am
Oliver Heald (Shadow Secretary of State for Constitutional Affairs & Shadow Chancellor of the Duchy of Lancaster (Assisted By Shadow Solicitor General), Constitutional Affairs; North East Hertfordshire, Conservative)
Clause 19 takes us into a different area. Conservative Members welcomed the decision in the 2004 budget to ask Philip Hampton to consider the scope for reducing administrative burdens, and particularly to focus on efficiency, regulatory inspections and enforcement. The central tenet in the Hampton report was that excellence in regulation requires entrenchment of the principle of risk assessment. He pointed to the need for better focused inspection activity, more use of advice for business, a reduction in form-filling requirements and more consistent penalties. Philip Hampton rightly praised—as we should—the independence and integrity of British regulators.
One of Philip Hampton’s principal recommendations was that regulators should follow what he described as the principles of regulatory enforcement. He produced a practical list that is easy to understand, that anyone can follow and that is useful to business. I intend to probe the Minister about why the Government did not adopt his list. It covers 10 or 11 points, such as that regulators and the regulatory system as a whole should use complex risk assessment to concentrate resources on the areas that need them most. The whole idea of risk assessment is now well understood in industry and among regulators. As for ensuring accountability, he said that regulators should be accountable and that all regulations should be written so that they are easily understood, implemented and enforced. He said that there should be no inspection without a reason, that businesses should not have to give unnecessary information nor the same information twice, that regulators should provide authoritative accessible advice easily and cheaply, and so on.
The wording under clause 19(2) is much abbreviated from those recommendations. It is vague and woolly in comparison with that detailed checklist. For example, there is no reference to the comprehensive risk assessment nor to accountability. It is arguable that the subsection breaches Hampton’s third principle, which was that regulations should be easily understood, easily implemented and easily enforced.
I understand that the Government’s better regulation commission came up with five principles of good regulation that are based on Hampton’s review. They are set out under subsection (2)(a) and (b). Will the Minister explain why those five principles are recommended under the Bill rather than those contained in the practical list suggested by Philip Hampton and tell us what subsection (3) is about? It is probably designed to exempt the Financial Services Authority from having to follow good regulatory practice. The Association of British Insurers says that it is often supportive of the FSA’s approach, but that there have been occasions when its decisions have not been consistent with the principles of good regulation. It gives the example of detailed rules applying to the sale of general insurance products, such as motor insurance, which it says are disproportionate for highly competitive markets. Although the ABI supports clause 19, in general, it says that subsection (3) may have the effect to some extent of letting the FSA off. I should be grateful if the Minister could tell us whether that is the Government’s intention and, if so, explain why. Is it the Chancellor’s wish or does the law require it?
In his report, Philip Hampton included many other recommendations beyond the application of the principles of regulatory enforcement—for example, that penalties should be based on risk assessment; that the resources released from risk-based assessment should be spent on advice services for business; that there should be consultation about forms; that each time a form is produced, regulators should state how long it would take to complete it; that there should be improved data-sharing between regulators to avoid constantly having to give the same information over and again; that there should be no updates of IT by regulators without scrutiny to ensure that they are not doing incompatible things; that regulatory impact assessments should include practicability of enforcement; and a lot of other recommendations that I shall not read out.
The Hampton report is probably being implemented in three ways: through clause 19, through the code in clause 20 and by upgrading the enforcement concordat, which is the voluntary code that came from local authorities. It was designed to encourage business-friendly enforcement by them, and is a well developed procedure.
Will the Minister put the clause into the context of the three strands, and explain where we should expect Hampton’s recommendations to be found and why he has gone for the five principles rather than the longer but more practical list produced by Philip Hampton?