Deregulation Bill

Debate between Lord McKenzie of Luton and Lord Collins of Highbury

Thursday 20th November 2014 Grand Committee

[Lord Collins of Highbury (Lab)]

My Lords, I, too, want to support my noble friend in his amendments today. I particularly want to focus on one element of regulation in relation to gambling and the Gambling Commission. I would also like to focus my remarks on what my noble friend Lord Rosser said, in the sense of asking what the Government’s view is on the role of the Gambling Commission in terms of its acting contrary to Clause 83. Is there evidence, which the Minister might want to put before the Committee, that says that this clause is required? At the end of the day, the gambling market is a unique one, where the public expect fair rules. They want independence for the regulator, because they want to ensure the rules are applied by the people operating in that market.

In the recent debate on the Gambling (Licensing and Advertising) Bill, we heard several calls that this market needs even further regulation, because it has a huge social impact, not least in terms of problem gambling—addiction—and the harm that it causes to both individuals and families. When we debated the Bill, we were focused on the need for adequate research to fully understand the consequences of our actions. That was certainly the Government’s view, and it is certainly the view of the Opposition: think before you act, and understand the consequences. This comes back to my noble friend’s view about unintended consequences, of which there were two here.

The Gambling Commission expressed a view during pre-scrutiny of the Bill, which I want to repeat. It focused on this matter of unintended consequences. It is a regulator that does understand the economic consequences. It is not a regulator that wants to ban gambling; it wants to facilitate it. In fact, the more it acts to regulate, in a sense, the more the market can grow, because this is about public confidence and public trust. This is where I believe the draft guidance, in seeking to clarify, may actually create uncertainty, which again comes back to these unintended consequences.

The Gambling Commission itself spoke about the need to be wholly independent, impartial and objective, and the need to have public confidence. It says that it does not think that the wording will impair its objectivity at all—it believes that it is acting in a way that could meet the requirements of this clause. However, as it says, if it gets confused or conflated with the promotion of the commercial interests of specific economic sectors, and it appears to the public that it is part of the commission’s role to promote the industry as opposed to permitting the industry to promote itself and grow so far as is compatible with consumer protection, the likely outcome is a reduction in public confidence and a consequent reduction in the public acceptance of gambling as a mainstream leisure activity. This clause could have the complete opposite effect of what it was intended to do. It could harm an industry that is a legitimate part of our economic activity. There are unintended consequences.

The Gambling Commission raised another point, which is important with regard to what my noble friends have said on the guidance and the fact that you could be creating uncertainty. They say that the guidance to the growth duty will be important. That is absolutely right, and it helps to develop better policy for the industry to have a real input in determining the economic impact of any regulatory change. It is very important for the industry to be clear how that should be done and to have some assurance that its views are taken into account. However, the reform measure designed to reduce burdens on an industry and foster economic growth may have the unintended consequence of the regulator and parts of the industry expending time and money on unproductive and costly delaying tactics if the guidance does not encourage speedy and transparent decisions.

I can see what is coming as regards the new regulations we had under the Gambling Bill. I can see that people entering the market may say, “We want to challenge the commission on this because it denies our ability to enter this market and our ability to grow economically”. In a sense, instead of the commission regulating fairly and being able to build public confidence, this could undermine that, which is a bad unintended consequence that the Government need to address and answer today.

[Lord McKenzie of Luton (Lab)]

My Lords, it may come as no surprise that I, too, support my noble friend’s amendment and express reservations about disturbing the current arrangements for the Health and Safety Executive. The very essence of the HSE’s role has positive implications for growth. It is about encouraging leadership from the top of an organisation, having effective systems, good employee engagement—key attributes for an effective business. Of course, its role in promoting safe and healthy workplaces is typically linked with higher profitability, productivity and worker loyalty. That is what the data used to show, and I believe they still do. However, IOSH states that,

“good workplace health and safety already supports growth”.

It expresses concerns that the new explicit duty could “cause confusion” and undermine the focus and judgment of the HSE. Therefore, perhaps the Minister can be more specific about the benefits to growth of these provisions being applied to the Health and Safety Executive, and about what changes to the way the HSE goes about its business the Government expect if they should be applied.

The impact assessment accompanying these proposals specifically identifies as good practice the HSE’s existing role in working with a number of trade associations and local authorities to create sector or topic-specific guidance. The HSE has of course been subject to a number of reviews in recent years, most recently that of my noble friend Lord Young of Graffham, of Professor Lofstedt, and the triennial review led by Martin Temple. Those have, in a variety of different ways, found the HSE and the regulatory regime, fit for purpose.

The blueprint for the HSE as it currently exists was set out in Lord Robens’ 1972 report, Safety and Health at Work. His vision of a goal-setting, risk-based and proportionate health and safety framework has endured. That is reflected in the HSE’s current business plan, which includes in its goals,

“drawing a distinction between real health and safety and bureaucracy and ‘overinterpretation’; making it even easier for people to understand and do what is required; devoting a greater proportion of effort where risks are highest and where we can have greatest impact; and continuing to hold to account those who expose their employees and others to unnecessary risk”.

The HSE can justifiably currently claim that it keeps the burden on business productivity to a minimum. Indeed, it effectively enhances it. It is proportionate in its decision-making and understands the business environment.

Understanding the business environment does not necessarily equate to reducing regulatory activity. Downturns in the business environment may engender a more focused approach. For example, if the North Sea sector is struggling for growth, the temptation to cut back on maintenance of the infrastructure may be strong; that has happened in the past. That would signal an environment where more, not less enforcement is needed. Conversely, the HSE is alert to circumstances where a pickup in a sector signals the need for more regulatory activity—housebuilding and refurbishment being one—where worker demand can, at least initially, outstrip available skills, so there is the prospect of more enforcement activity because of growth in the sector. I presume that the Government are content with that. We should be mindful of the risks of the growth duty undermining compliance and enforcement.

IOSH makes reference to the HSE’s enforcement management model, which uses “economic advantage deliberately sought” as a contributing factor to prosecution. How does that approach sit with the growth duty? Reference is also made to case law, in which the judgments specifically acknowledge that adverse economic effect on the business had to be accepted as a consequence of improving safety.

What discussions have the Government had with the HSE about that duty? What assessment have the Government made about the prospect of greater challenges to the HSE’s enforcement proceedings with the new duty? Is it considered that any change is required to the HSE’s enforcement management model? The health and safety system is working well in the UK. There are risks that the provisions will cause unnecessary confusion. Why fix what is not broken, where no advantage is to be expected?

We had a response to our circular from the Homes and Communities Agency; I thank it for its reply. It states:

“The HCA, when acting as social housing regulator, is classed as one of the ‘non-economic’ regulators to whom this proposed duty will apply”.

I guess that that is accepted. It says:

“Regulation of social housing has existed for approximately 40 years and is currently delivered under powers contained in the Housing and Regeneration Act 2008, which came into force in April 2010 ... The Act requires that we discharge what are termed the ‘economic regulation objective’ and the ‘consumer regulation objective’. The main way in which we deliver these objectives is by setting ‘economic standards’ and ‘consumer standards’, and regulating against these”.

It goes on to say:

“We are precluded by legislation from proactive monitoring of the consumer standards so in effect are an organisation primarily focused on our economic regulation remit”.

It sets out what its economic objectives are; that is,

“to ensure that registered providers of social housing are financially viable, properly managed, and perform their functions efficiently and economically … to support the provision of social housing sufficient to meet reasonable demands (including by encouraging and promoting private investment in social housing) … to ensure that value for money is obtained from public investment in social housing … to ensure that an unreasonable burden is not imposed (directly or indirectly) on public funds … to guard against the misuse of public funds”.

It says:

“In many respects the sub-clauses of the economic objective are mutually reinforcing. For example, Registered Providers have an excellent track record in meeting their obligations to lenders, consistent with the Regulator’s objective to ensure providers are financially viable. This is also a key factor in their ability to borrow at competitive margins and therefore invest in the supply of new homes. However, on some issues and on some providers we also need to strike a balance between encouraging investment (typically in new development) and safeguarding the viability of providers and historic taxpayer funding”—

so there is a potential conflict. It continues:

“This is reflected in our standards, the way we obtain assurance that standards are being met, and in the action we take if providers do not comply with the standards”.

The HCA has the following questions, which I pose to the Minister, about the new duty coming into effect. It asks:

“How the duty will interact with existing duties. If the duty is ‘free standing’ then we will need to consider how it is balanced against the full range of our regulatory objectives and how we balance this in our decision making”.

It also asks:

“How widely regulators will need to consider economic growth. As set out above we already have a duty to support the supply of social housing, which is a growth related objective. We would need to understand if the duty is to be interpreted in a way that goes beyond our existing objective, and if so the impact on our regulatory remit and the potential impact on resources”.

It further asks:

“Whether the duty will be about minimising burdens or alternatively about being fully mindful of economic growth implications when making decisions? In our particular sector, and again referring to our obligation to support the provision of social housing, there is a strong argument that having in place strong regulation makes the sector attractive to on-going investment and therefore growth”,

and how that will sit with the overall growth duty obligation. It also raises the point:

“Whether the duty will apply to regulatory policy design or to all day-to-day decisions and all levels of decision making in between. It is the regulator's view that application of such a duty on the micro level of individual case decisions is not straightforward and that a similar outcome can be gained from a more strategic approach”,

and asks how,

“decision making might be challenged in relation to compliance with the duty”.

These are highly relevant questions and we hope that the Minister is able to deal with them fully, either today or in writing afterwards.