Clause 23 - “Regulatory functions”

Legislative and Regulatory Reform Bill – in a Public Bill Committee at 1:15 pm on 9 March 2006.

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

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Following the Minister’s invitation to continue, in relation to clause 23, the debate that we were having on clause 22, does he agree that the functions described in clause 23 are very wide ranging, and that that is a big advantage? However, it is disappointing for the Government to indicate that when it is embarrassing to include the regulatory functions defined in clause 23 for some Departments in the scope of the requirements of clause 19 and in the code of practice in clause 20, they will not play ball.

Obviously, HMRC raises tax—that may be its primary responsibility—but it also exercises regulatory functions, because within the meaning of subsection (1), it imposes “requirements, restrictions or conditions” in relation to activities. Does the Minister concede that HMRC has regulatory functions within the scope of clause 23, and can he explain why, notwithstanding that, it will not be subject to the same regime of common-sense reduction in the burden of regulation as other regulators?

Photo of Andrew Love Andrew Love Labour, Edmonton

Using the criteria that the hon. Gentleman has just outlined, will he say why he has focused on HMRC? Surely the point applies to a considerable number of Departments. Why does he not include those in relation to the Bill?

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Because I know that we have to finish our deliberations by 4 pm and I thought that it would be better to give a representative example, rather than going through an exhaustive list. To answer the hon. Gentleman’s point directly, if he looks at annexe B of the Hampton report, he will see that paragraph 20 contains a list of what it describes as “Notable UK Regulators”. First on that list is none other than the HMRC. I concede that the Standards Board is not on the list—it certainly is not so high up, anyway—but the HMRC is right at the top, which is why I have tended to dwell on that organisation.

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

I do not want to make a habit of intervening on the hon. Gentleman, but he referred to page 84 of the Hampton report and said that there was a list of notable UK regulators, the first of which was HMRC. It would have been helpful to the Committee had he given the full title on that page, which is

“Notable UK Regulators out of scope”.

He did not provide the Committee with that fact.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Of course those regulators are out of scope: the Chancellor of the Exchequer said that they must be. That is the only reason for their being out of scope. The intervention from the hon. Member for Edmonton (Mr. Love) was about why I picked on HMRC as an important regulator. The Hampton report considers it to be a notable UK regulator but, as the Minister has said, the Chancellor said that the Hampton report could not consider the regulatory functions of the HMRC. That is why it has not been included and is out of scope.

Interestingly, there is a justification in annexe A as to why Ofgem, the Office of Rail Regulation, Ofwat, the Civil Aviation Authority and so on are excluded: they are “economic regulators”. The Minister has referred to that. However, no justification is contained or recorded in the Hampton report as to why the HMRC is excluded. That seems to be a supreme example of Treasury double standards: “Let’s set a regime for everyone else but not for our own home team.”

As the Minister does not come from the Treasury, I hoped that he would be more upbeat and say that he hopes that, in so far as the HMRC has regulatory functions that impact on the administrative and other burdens on business, it will be happy to comply with the spirit and the letter of the code of practice that will be drawn up under part 2 of the Bill. Repetition will make no difference, but I hope that he will be able to exercise some flexibility and respond to the challenge that if the HMRC exercises regulatory functions, it should be subject to the same controls as other regulators.

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

I want to consider my hon. Friend’s point about the HMRC being a major regulator and a body that is potentially covered by part 2. It is well   known that small businesses in particular feel very burdened by the requirements of the HMRC. Earlier this week, I spoke to representatives of the Forum of Private Business, who said that they had just completed a survey of small business about the tax burden and that there was a great groundswell of concern about the administrative burdens imposed on small business. I am sure that the hon. Member for Edmonton will look forward to seeing the report when it is published.

I hope that when the Minister considers his list of who is to be included and who is not, he will not just go for the easy targets and will consider dealing with all these various bodies that are now “Of” something or other—Ofgas, Ofwat and the rest of them. It would be wrong to let off the “Ofs”. We need to have a system where the main regulators in this country set the standard, trailblazing for good principles of the sort set out in clause 19—transparency, accountability, proportionate behaviour, consistency—and targeting their actions. They should not be the ones who lag behind. It is a point that I have made before, but I hope that the Minister will at least consider it.

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

I will respond briefly. I congratulate the hon. Gentleman on using the same joke in two consecutive sittings of our Committee. I do not know why he chose to do it, although I could hazard a guess.

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

It is a different Chairman, Sir Nicholas. That is the purpose of it.

I simply remind the hon. Gentleman of the point that I made when he made a similar remark. Those regulators listed in clause 22(5) were not within the scope of the Hampton review because their work is different in nature and scope from the general business regulators that Hampton dealt with. Secondly, they operate in areas of market security and sensitivity and it is important to avoid the uncertainty that that may create.

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

I wonder whether the suspicion that a regulator may be acting in a non-transparent, unaccountable, disproportionate or inconsistent way might affect the markets in any way as well.

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

What we are setting out is that regulators, with the exceptions that are a statutory responsibility, must adhere to the principles within clause 19 and any code of practice in clause 20, which we will consult on. It is certainly my understanding that the regulators listed in clause 22(5) will have a challenge instead of regulatory functions, but also parameters within which they must operate in respect of how they interact with business and others. It may be helpful before Report to examine the specific areas in which those five operators function as a matter of information for the hon. Member for Somerton and Frome (Mr. Heath). If he wishes we can discuss that, so that he can analyse the way in which they operate and their sensitivity to the better regulation agenda, which I know he cares about.

I absolutely agree with the hon. Member for North-East Hertfordshire about small businesses. He made a reasonable and important point about the need to lighten the load of bureaucratic burdens on them. Some important steps have been taken in that regard in recent times, but we need to go much further. Without wishing to stray on to other clauses, he rightly supports the fact that one of the aims of the Bill is to remove unnecessary bureaucracy, outdated regulations and unnecessary burdens.

On the point about the HMRC, obviously the definitions in the clause are designed to be broad enough to capture the wide-ranging functions carried out by those regulators covered by the Hampton review. Their purpose is to enact the findings of the Hampton review. That is an additional reason why the Bill does not cover the HMRC, which is top of the list on page 84 in annexe B of notable UK regulators that are out of scope of the review. The HMRC has its own ambitious better regulation agenda, which my right hon. Friend the Chancellor published in an action plan at the time of the last Budget. That action plan, which is a publicly available document, sets out how the HMRC carries out the better regulation agenda in a way that matches its responsibilities. I hope that that reassures hon. Members, but of course they can draw on that specific document if they seek additional information on the way in which the HMRC is regulated in that respect.

Question put and agreed to.

Clause 23 ordered to stand part of the Bill.