Clause 22 - Functions to which sections 19 and 22 apply

Legislative and Regulatory Reform Bill – in a Public Bill Committee at 10:00 am on 9 March 2006.

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Question proposed, That the clause stand part of the Bill.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I shall be brief. I simply want an explanation of the list in subsection (5). We have already gone through the process iteratively with clauses 19 and 20 with regard to the need to exempt some of our most important regulators from provisions that are supposed to regulate the regulators. We now have a new group of “off-limits” that are not to be regulated. I looked for further guidance in the explanatory notes and in paragraph 70 it says that the reason why the order may not specify regulatory functions on these five bodies is:

“The Minister cannot specify in the order the regulatory functions” of those five bodies, which, as an explanation, falls a little short of what is required. I would be grateful if the Minister expanded on that a little.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

I was going to ask why the “Ofs” have been let off. Perhaps I might also ask the Minister why it is necessary to specify the functions in this way. Clause 23 defines regulatory functions; why is it not the case that anyone who exercises one of them is caught under clauses 19 and 20? What is the point of the Minister interfering to say who is specified as a regulator in this way? Why not just say that all regulators are covered?

The overall scheme of the provisions introduces absolutely classic, sensible and proportionate principles on which regulators are supposed to act, so why does the Minister need to say which regulatory functions they apply to? Why can the provisions not apply to all of them? Is there a point that we are missing here? The big boys of the “Ofs”, such as the Gas and Electricity Markets Authority, Ofcom, and Ofrail—what is it called? [Laughter.] Something like that. The Postal Services Commission is known as something; I do not think it is Ofpost. I know that the Water Services Regulation Authority is popularly known and not loved as Ofwat. Why are the “Ofs” being let off?

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I want to follow on from that point. Surely, every body that exercises a regulatory function under the definition of clause 23 should be included unless specifically excluded. The Government are saying, “Only those regulatory bodies that exercise particular regulatory functions that we think should be subject to this code are to be included.”

I want to ask the Minister about some specific examples. Her Majesty’s Revenue and Customs is carrying out regulatory functions in accordance with clause 23. Does the Minister have it in mind that those functions should be subject to the principles and code of practice set out in part 2 of the Bill? The Department for Work and Pensions carries out functions as defined in clause 23 and we know that it has caused an enormous amount of angst for many of our constituents in the process of carrying out those functions. Will its activities be subject to the principles set out in part 2? Will the Department for Environment, Food and Rural Affairs, or the Child Support Agency, for example, be subject to the regulatory controls set out in part 2?

I congratulate the hon. Member for Somerton and Frome on his well-deserved elevation. He mentioned the specific bodies set out in subsection (5). Does the Minister accept my point on clause 19, that the Office of Rail Regulation has recently been guilty of a gross breach of the Hampton principles in imposing a fine of £250,000 on Network Rail for technical breaches of regulatory requirements? If he accepts that, does he not think that, in the context of the Bill, we should be doing something to ensure that that cannot happen again?

Similarly, the Postal Services Commission is now actively engaging in imposing substantial financial penalties on Royal Mail, with the consequence that the cost to Royal Mail users increases. Does the Minister not think that the Postal Services Commission should have to comply with the principles set out in part 2? I hope that the Minister will address each of those important examples.

Photo of Jim Murphy Jim Murphy Parliamentary Under-Secretary (Cabinet Office) 10:15, 9 March 2006

Rather than make a speech, I shall respond to the points made by Opposition Members. Those bodies were listed in clause 22(5) for two reasons. First, they were not covered by the Hampton review, because their work is so different in its nature and scope from the general business regulators that Hampton dealt with. They are not intended to be caught by the Hampton recommendations and the principles and code cannot automatically be applied to them. Secondly, those regulators are operating in areas of market security and sensitivity, so it is important to avoid creating uncertainty about the rules governing the exercise of their powers.

On the point about regulatory functions, we would all have difficulty in dealing with specific aspects of part 2, particularly the definition of a regulator. The obvious initial approach is to list the organisations and come up with a definition of a regulator, rather than make a list or a definition of a regulatory function. In attempting to draft an appropriate definition of a regulator, it became apparent that definition would inadvertently capture a wide range of bodies outside the scope of the Hampton review. It may help Committee members to know that the Government’s assessment was that the best attempt at defining a regulator ended up capturing organisations such as MI5, which I am not certain would need to be transparent in all its dealings, the General Medical Council, the British Medical Association and others. That is why we set out to define a regulatory function, rather than a regulator.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

The Minister is in danger of exempting so many genuine regulators from his list that it brings into disrepute the whole concept. I wonder whether he considered the alternative, most obvious, route of having a schedule of regulatory bodies that are included, to avoid the difficulty in respect of the MI5s of this world, which I accept might have difficulties following the principles. However, I do not accept that the five bodies in subsection (5) should have any problem following the principles; if they are not following them, they should not be doing the job.

Photo of Jim Murphy Jim Murphy Parliamentary Under-Secretary (Cabinet Office)

I give way to the hon. Member for Harwich (Mr. Carswell).

Photo of Douglas Carswell Douglas Carswell Conservative, Harwich

I am surprised that the Minister dismisses the idea that our security services should be made more transparent and accountable. Perhaps if they had been made more so, they might have a slightly better, more successful record of spotting threats to this country. Accountability and transparency are good things for all institutions.

Photo of Jim Murphy Jim Murphy Parliamentary Under-Secretary (Cabinet Office)

The hon. Gentleman’s point is entirely spurious and ill judged. However, it is for him to make his own points in his own way about the security services and the Bill. Such issues are, of course, outwith the scope of the Bill, and I do not think you would encourage us to debate them, Mr. Caton.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

Does the Minister have any thoughts about which regulators he does or does not want to cover? If so, will he let us know? It would be helpful to have some idea. We are committed to the idea that the principles, which we agree are important, should cover regulators generally. The Minister is right to say that an infelicitous definition might drag in somebody whom we would all agree should not be covered. However, we do not want to let off the most important regulators in the country; as I said, we would like to see them as the trailblazers that set the standard.

Photo of Jim Murphy Jim Murphy Parliamentary Under-Secretary (Cabinet Office)

The regulators that we have in mind are listed in annexe B of the Hampton report; that may help the hon. Gentleman. He can reflect on whether that list is appropriate between now and Report.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I do not have annexe B of the Hampton report with me, so can the Minister confirm that it includes Her Majesty’s Revenue and Customs, the Department for Work and Pensions, the Child Support Agency and the other examples to which I referred? If it does not, why not?

Photo of Jim Murphy Jim Murphy Parliamentary Under-Secretary (Cabinet Office)

I confirm that the list does not include the organisations mentioned by the hon. Gentleman. However, this very afternoon I shall post him, for his information, a copy of the report with annexe B. A Minister would have to consult those whose functions will be listed, and the affirmative procedure for orders would be followed.

As we know, the aspect of part 2 that we are discussing is highly technical. Clauses 19 and 20 set out the regulatory principles and code of practice, which are defined and described in clause 23; clause 22(2) specifies a regulatory function

“to which sections 19 and 20 apply.”

As I say, the Minister must consult and lay an order—that will be done through the affirmative procedure, so must be agreed by both Houses—and specify any   exemption and how it affects the devolution settlement throughout the United Kingdom. We think that more appropriate than providing an extensive list of regulators, as suggested by the hon. Member for Somerton and Frome. I hope that that helps to illustrate clause 22(2) in particular and the interrelationship between the different clauses.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

That does not answer the point about why, to take one specific example, Her Majesty’s Revenue and Customs, which exercises significant regulatory functions over business, is not covered by those principles. It is no good the Minister just asserting that it is not covered—why is it not?

Photo of Jim Murphy Jim Murphy Parliamentary Under-Secretary (Cabinet Office)

I do not have to wait for this afternoon’s post to send the hon. Gentleman a copy of annexe B; page 84 of the report is on national regulators. The hon. Gentleman will be relieved—or angered; I am not sure—to see that Her Majesty’s Revenue and Customs is the first on the list of notable UK regulators.

It is considered that the principles in clause 19 and the code of practice in clause 20 should be covered by those regulators for which a Minister of the Crown may specify regulatory functions under clause 22(2)—as described in clause 23, which is about regulatory functions.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

We shall resume this afternoon. Will the Minister guarantee that he will then be able to explain why Her Majesty’s Revenue and Customs is not to be subject to the provision? Simply saying that it is not included in annexe B does not deal with the substantive question of why that very important body, which exercises regulatory functions over business, is not to be included under the provisions of part 2.

Photo of Jim Murphy Jim Murphy Parliamentary Under-Secretary (Cabinet Office)

Part 2 is about giving effect to the recommendations of the Hampton review, and Her Majesty’s Revenue and Customs was not part of our agenda on that review in respect of the regulators. That is my answer to the hon. Gentleman.

It being twenty-five minutes past Ten o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at One o’clock.