Legislative and Regulatory Reform (Regulatory Functions) (Amendment) Order 2014

Debate between Viscount Younger of Leckie and Lord Curry of Kirkharle

Tuesday 11th March 2014 Grand Committee

[Viscount Younger of Leckie]

My Lords, the code provides a flexible framework that individual regulators can apply in a proportionate manner. It supports and enables regulators to design their service and enforcement policies to best suit the needs of their service users, while allowing resources to be focused on the non-compliant. The Regulators’ Code encourages greater transparency in the way regulation will be delivered, encouraging trust, open dialogue and accountability between regulators and those that they regulate.

The code applies to a wide range of people exercising non-economic regulatory functions, including more than 60 national regulators, from the large regulators, such as the Health and Safety Executive and the Environment Agency, to much smaller regulators, such as the Sports Ground Safety Authority and the assay offices, which happen to be part of my intellectual property portfolio.

The code also applies to a number of regulatory functions exercised by Ministers and those exercised by all 433 United Kingdom local authorities. Such diversity, not only in size and resource but in purpose, has been considered in developing the code, which is flexible in its nature. It does not add burdensome requirements, and regulators can apply the principles in a proportionate manner to suit local demands. Regulators are obliged to have regard to the code, but this duty is subject to any other requirement affecting the exercise of regulatory functions. This means that the duty to comply with the code is a secondary objective. It does not undermine the regulator’s primary protection duties.

This revised code has been produced in response to a post-implementation review carried out in 2012 and an eight-week consultation on a revised code in 2013. Both the review and the consultation found that regulators had generally accepted the code and its principles-based approach. National regulators had by and large adopted the principles into their enforcement policies. The Health and Safety Executive, for example, has a clear explanation on its website detailing how it meets the provisions of the code, including the use of risk assessment to guide its regulatory activity. The Forestry Commission is also a good example of a regulator which has adopted the code principles. Its enforcement policy details how enforcement activity is carried out in accordance with the code and principles of good regulation.

However, we found that there was nevertheless room for improvement. First, we found that many local authorities had not consistently adopted the principles. For example, enforcement policies could not be located on 15% of the local authority websites reviewed. Where local authorities had published enforcement policies they were not fully compliant with the principles of the code. Secondly, there was a lack of transparency about how regulation would be delivered, and we received feedback that some of the code’s provisions were overly prescriptive and burdensome. Thirdly, business representatives felt that the code had failed to promote open and early dialogue with regulators because visibility of the code among businesses was low. Many businesses had little or no knowledge of the code’s existence.

The updated Regulators’ Code builds on the experience of and lessons learnt from the existing Regulators’ Compliance Code. It adopts five principles which were in the previous code. The first principle is that regulators should carry out their activities in a way that supports those they regulate to comply and to grow. The second principle is that regulators should provide simple and straightforward ways to engage with those they regulate and to hear their views. Thirdly, regulators should use risk assessment methodologies to support their regulatory activities. Fourthly, regulators should share information about compliance and risk, and fifthly, regulators should ensure that clear information, guidance and advice are available to help those they regulate to comply. In response to the feedback we received, the new code also includes a sixth and final principle that regulators must ensure that their approach to their regulatory activities is transparent. The code encourages regulators to do this by publishing service standards which set out what business and the public can expect from their regulators. The other significant difference is that the provisions in the revised code have been simplified so that the code is now clearer in setting out expectations and, as a consequence, it is also much shorter.

The revised code was published in draft in July 2013 and the Better Regulation Delivery Office has organised a series of UK-wide awareness-raising events and training sessions since then. This has ensured that regulators have had time to review their existing policies and procedures and they have been assisted to meet the provisions of the code. In addition, the Better Regulation Delivery Office is continuing to work with regulators and bodies such as the Local Government Association to develop tools, including enforcement policy and service standards templates, to help regulators to comply with the code provisions. We have also worked extensively with the business community and trade associations to ensure that they are aware of the new code. As a result, we are confident that regulators will comply with the new code and that businesses will know what they can expect of their regulators when the code comes into force as soon as early April. In the unlikely event that a regulator does not comply with the provisions in the code and it is not able to provide any justification for departing from the principles, the Better Regulation Delivery Office will work closely with the individual regulator to remedy the non-compliance.

Businesses and their representatives will also be able to hold regulators to account by challenging any non-compliance with the code principles. In the first instance this could be through dialogue with regulators, and if that was insufficient, they could of course seek permission to judicially review any non-compliance. We believe that this will provide a sufficient incentive to encourage regulators to adopt the principles in the code.

I would like to stress that the introduction of this code will not add additional burdens or introduce more bureaucracy for regulators or businesses. As I have stated, the Regulators’ Code shortens and simplifies the provisions contained in the existing Regulators’ Compliance Code to make it easier for regulators to comply. It does not override any existing statutory requirements but sits alongside them. It will enable regulators to direct limited resources to the areas of greatest need, thereby reducing the bureaucracy and burdens on low-risk, compliant businesses.

I turn to the second instrument. The purpose of the regulatory functions order is to update the regulatory functions which are within the scope of the Regulators’ Code. These functions are subject to the statutory principles of good regulation set out in Section 21 of the Legislative and Regulatory Reform Act 2006.

The better regulation principles provide that regulatory activities should be carried out in a way which is transparent, accountable, proportionate and consistent. In addition, regulatory activities should be targeted only at cases where action is needed. The Government believe the better regulation principles and the Regulators’ Code should be applied by the broadest possible range of national regulators, Ministers and local authorities exercising non-economic regulatory functions.

To this end, we have consulted Monitor, the Groceries Code Adjudicator, the Regulator of Community Interest Companies and the claims management unit of the Ministry of Justice, which have agreed that their functions should be in scope of these statutory provisions. The 2014 order therefore adds these bodies to the list of those already in scope.

It is my firm belief that the revised Regulators’ Code and order extending coverage are important parts of the Government’s overall package of better regulation measures. They are an important step in developing modern, open and transparent approaches to regulatory delivery. I therefore commend this order and the Regulators’ Code to the Committee.

[Lord Curry of Kirkharle (CB)]

My Lords, I support this change. I need to declare an interest. I chair the Better Regulation Executive and work very closely with the Better Regulation Delivery Office. I am tempted to say that I regularly meet the regulators, both individually and collectively. I have created a forum, the better regulatory outcomes group, where we meet regulators on a three or four-monthly basis. It was at such a meeting that we floated the concept of revising the code in the first instance. The regulators were very supportive of this, in that many of them are already adopting the principle of the code, as the Minister has said—but it was inconsistent. They recognise that, today, with better regulation being a high priority for government and the encouragement of economic growth being of paramount importance for the economy, for regulators to be seen to be supporting growth and encouraging companies to grow is of higher priority than it was when the original codes were introduced. I therefore commend this change to the Committee and firmly support it.

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[Viscount Younger of Leckie]

There are no consumer representatives mentioned in my brief. However, in addition to the ones I have mentioned, 20 business and trade associations responded to the consultation and there were meetings with the National Consumer Federation. I am more than happy to write to the noble Baroness to clarify the relationships and contacts we have had on this with consumer representatives.

[Lord Curry of Kirkharle]

I am not sure whether it is on the list, but Citizens Advice is in the forum I established with regulators. It was represented and certainly took part in the initial discussions regarding the revised code.

[Viscount Younger of Leckie]

I thank the noble Lord, Lord Curry, for that intervention and hope the noble Baroness, Lady Hayter, will find it helpful. The noble Baroness also raised the issue of legal services. The Legal Services Board is subject to the regulatory principles in the Legal Services Act. The Regulators’ Code sits alongside those principles and does not override them.

I remind noble Lords that the purpose of these two complementary instruments is, first, to revise and update the current Regulators’ Compliance Code with the draft Regulators’ Code. The second instrument updates the regulatory functions that are currently within the scope of the Regulators’ Code and the principles of good regulation. The Regulators’ Code encourages transparency and accountability in the relationship between regulators and those they regulate. It enables regulators to direct resources to the areas of greatest need, reducing bureaucracy and ending the culture of tick-box regulation. I commend both the Legislative and Regulatory Reform (Regulatory Functions) (Amendment) Order 2014 and the Regulators’ Code to the Committee.

Enterprise and Regulatory Reform Bill

Debate between Viscount Younger of Leckie and Lord Curry of Kirkharle

Monday 14th January 2013 Grand Committee

[Lord Curry of Kirkharle]

My Lords, I declare an interest in that I chair the Better Regulation Executive, which was very much part of recommending these changes. I am delighted that the noble Lord, Lord McKenzie, recognises the value of the scheme and I pay tribute to the previous Government for having introduced it because it is a valuable tool and has reduced significantly the burden on businesses that have participated in it. My concern about the proposed amendment is the definition of “to a material extent”. It will create a lot of debate and potential confusion around how one defines “material extent”. The trade associations that have been consulted and would be keen to participate in this scheme have members who all have a common interest. I see this as providing a real opportunity to take a significant regulatory burden away from businesses that are members of a trade association and would wish to participate in such a scheme, so I have a problem with Amendment 28ZDA.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)]

My Lords, before I turn to these amendments I would just like to thank the noble Lord, Lord Stevenson, for his very kind and extensive words of welcome at the previous Sitting of Committee. I look forward to a continuing and fruitful dialogue with the noble Lord. As he said himself, we sing in the Parliament choir together, although I hazard a guess that his tunefulness is somewhat superior to my own. I look forward to working closely with him and other noble Lords over the coming weeks on this Bill. I also confirm that I intend to propose meetings on the various matters where it was suggested this would be helpful at earlier stages of the Committee.

Turning to this group of amendments, I thank the noble Lords, Lord McKenzie and Lord Stevenson, for their amendments to Clause 59 concerning eligibility for the primary authority scheme, which I shall respond to in turn. This scheme was of course introduced by the previous Government, as the noble Lord, Lord McKenzie, mentioned, and has been much welcomed.

Clause 59 broadens the criteria for businesses to be eligible for the primary authority scheme. It will mean in practice that many small businesses that operate in only one local authority area will be able to join, together with similar businesses which share an approach to compliance. I hope that I can answer the question from the noble Lord, Lord McKenzie, about what that means.

The Government see a shared approach to compliance as one that a business consistently follows in order to fulfil its regulatory obligations. Such an approach should result from guidance or procedures issued from a single point, such as a head office or a trade association. This will mean that franchises of the same brand or members of the same trade association, for example, could qualify. They will be able to enjoy the valuable assurance that a primary authority partnership can bring.

The new eligibility criteria have been intentionally drafted broadly. This is to ensure that as many small businesses as possible can benefit from reduced regulatory burdens. A business will be able to join the scheme only if the Secretary of State is satisfied that the business meets the eligibility criteria, and statutory guidance will provide more detail about the matters likely to be taken into account in assessing eligibility under the new criteria.

It is intended that further detail as to the circumstances likely to constitute a shared approach to compliance will be included in statutory guidance. Adding further detail to the drafting of the clause could inadvertently restrict participation in the scheme for the very businesses that this clause is attempting to help.

Of course, having a broad definition of a shared approach to compliance in the legislation means that a wide variety of groups of businesses could qualify for the scheme and the nature of the resulting partnership will rightly need to vary. For example, where a trade association acts purely to distribute information to its members, the primary authority partnership will be very different from one which involves a trade association that provides a fully audited accreditation scheme for its members.

This type of detail will also be given in the statutory guidance and the statutory mechanism for scrutiny of proposed new partnerships by the Secretary of State provides assurance that shared approaches to compliance will be handled appropriately.

Amendment 28ZDB seeks to impose a statutory requirement for consultation before the Secretary of State issues statutory guidance on shared approach to compliance. Guidance for businesses and local authorities will be very important to provide detail of how the extended scheme will work in practice. The views of all interested parties will be vital in making the scheme work as well as it possibly can. For this reason, a commitment was given during Committee debates in the other place that,

“any guidance published as a result of the clause will be developed in consultation with stakeholders, including businesses, local authorities, trade associations and business groups”.—[Official Report, Commons, Enterprise and Regulatory Reform Bill Committee, 12/7/12; col. 606.]

I should like to pick up on a number of the comments raised. My noble friend Lord Deben asked about continuing the process. The Government are committed to the primary authority scheme. It is a key tool in reducing red tape and ending the tick-box culture of regulation.

The noble Lord, Lord McKenzie of Luton, asked at the beginning of the debate whether there were any extensions to primary authorities in the pipeline. I can confirm that the Government are consulting on extending primary authorities to include several new regulations, including those on sunbeds, if I read the noble Lord correctly. He also asked about statutory guidance and consultation. The Secretary of State already issues statutory guidance in relation to the primary authority scheme, and Clause 59(5) provides that the Secretary of State can also issue guidance on the matters likely to be taken into account in assessing whether a business meets the new “shared” approach to compliance test. In Committee in the House of Commons, a commitment was made to develop guidance in consultation with stakeholders, including local authorities. I can confirm that the existing statutory guidance will be updated to include further content relating to these proposals. This will be in place, in time for the proposed extension of eligibility becoming effective.

In summary, I hope that noble Lords will not press their amendments, because I hope that I have provided sufficient reassurance that these matters will be dealt with by guidance, taking into account the views of interested parties.

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[Lord Curry of Kirkharle]

My Lords, I will also try to reassure the noble Baroness, Lady Greengross. Under the new governance arrangements that exist for the primary authority scheme with the Better Regulation Delivery Office, there is significant representation from local government on that governance body. I therefore hope that she will be reassured that there will be considerable discussion between the Better Regulation Delivery Office and local government on how the scheme will be implemented.

[Viscount Younger of Leckie]

My Lords, Clause 60 strengthens primary authority inspection plans. Its effect is to make it binding for local authorities to act in accordance with a plan which is in force. Strengthening inspection plans in this way is a crucial measure for the Government’s aim of,

“ending the culture of ‘tick-box’ regulation”.

Under the current provisions, primary authorities and businesses can work together to establish an inspection plan. Several businesses have done so, and report more informed and better targeted enforcement as a result. As things stand, local authorities must have regard only to plans, and are not bound by them. We have been told by primary authorities that plans and requests for feedback are not being followed in many cases. This means that the full benefits of inspection plans are not being realised, and many businesses are put off developing them because they do not have confidence that they will be followed.

With this clause, it is our intention to remedy this problem and to improve inspection plans. We are giving them the teeth that they need to deliver as much benefit for businesses as possible. This will ensure that businesses and primary authorities have certainty that inspections will be carried out in accordance with the plans in which they have invested. It will also mean that essential, timely feedback is received to keep the business informed of its key risks. Inspection plans are a crucial tool in enabling businesses to earn recognition for their compliance procedures and to reduce the burden of regulation. They also allow firms to focus on the key risks to their business and optimise their procedures, saving valuable time and wasted effort and allowing them to provide a better service to their customers.