Better Regulation

Lord Stunell Excerpts

Thursday 7th December 2017 Lords Chamber

[Lord Stunell (LD)]

My Lords, it is a delight to respond to this debate but first I need to declare two interests. I was a member of the Liberal Democrat negotiating team that ensured that “one in, one out” was inserted into the coalition agreement back in 2010. I then went on to become a Minister in the Department for Communities and Local Government with responsibility for, among other things, building regulations, which have been mentioned in this debate.

I congratulate the noble Baroness, Lady Neville-Rolfe, who has done the House a service by bringing this debate forward. It is not, perhaps, one of the sexy, high-profile issues that we might see in the press. I do not think that a debate on regulation is going to be reported on the front page of the newspapers in the current news environment, but it has been extremely important and will have a major impact on the way that events will pan out should we leave the European Union. Many contributors to the debate have illustrated the point that being for or against regulation is not a sensible point of view; rather, it is about making sure that regulations are pragmatic and proportional. I noticed that the noble Baroness said she was in favour of good regulations and against bad or poorly enforced ones. I should have thought that that was not very controversial.

I want to pick out one point from the noble Baroness’s case, relating to Grenfell Tower. It would be a great mistake for this House to second-guess what inquiries might or might not say about that, but I have already asked the Minister a Question and have had a reply about the failure to implement one part of the current building regulation regime which would have allowed there to be a signed person on-site with responsibility for saying that there had been compliance with regulations. That, perhaps, would have made the process of finding out who was responsible quite a lot easier.

I drew out from what the noble Baroness said that independent certification was a clear need. She said that in relation to Volkswagen, and she said it in relation to drying machines. Some of us might say that about Brexit. On Tuesday I shall see whether my experience is the same as my noble friend’s when I look at the construction industry in particular. Regulations need to be understandable and enforceable.

The noble Baroness, Lady Andrews, posed some of the key questions to the Minister in this debate. If we are to have regulations that are proportional and effective, preventing them coming before the RPC seems an extremely strange way of going about it. I hope the Minister will find time to give some answers that the noble Baroness and a large number of other speakers have raised in the debate.

I particularly commend the noble Lord, Lord Curry, whose experience is probably unmatched in this House as a former chair of the BRE executive. I think he brought a dose of realism, based on practical experience, and he also said that there was not enough independent challenge in the system. That, again, raises the question of what is happening to the RPC.

The noble Baroness, Lady Henig, in a good contribution on security, listed all the occasions when she has received firm assurances from Ministers in this House that she should not worry and things will be fine in the end. I hope that in his reply today—when he tells us that everything is lovely and we should be satisfied that Ministers will always use their best judgment and best endeavours—the Minister will bear in mind some of the problems that the noble Baroness, Lady Henig, set out.

Good regulation should be about limiting the capacity to do harm—harm by individuals and harm by corporate bodies. That includes physical harm as well as the financial cost to a person who would otherwise be a victim, hindering their capacity to thrive. It is therefore not sound to talk of regulation as simply putting right market failure. We have traffic regulations which say which side of the road we can drive on, but that is not about market failure. We should also understand that the costs to those who are regulated is often easily offset by the savings to those benefiting from the regulations. The House of Lords briefing has drawn attention to the NAO report in September and to the Competition and Markets Authority. The latter has been commented on a little unfavourably in this debate. However, for every pound it spends, it saves consumers £10. We need to understand that proportionality is not simply about cost and not simply about markets. There cannot be mileage in a mindset that dismisses all regulation as the work of the devil and the enemy of growth. On the other hand, neither can it be said that all regulation is good, proportionate and fair and works exactly as it should. As a former Minister and someone who received advice from civil servants I know that regulations are easily generated but that their downsides are often difficult to predict, particularly for those who stay inside the departmental bubble.

That is why successive Governments have pushed hard to get things costed and checked out in advance. That is why we have impact assessments—and as someone who signed a number of those in my ministerial career I can say that they ask many questions, such as: “Have you looked at alternatives? Why are you not following the alternatives? Has there been a consultation? What was the outcome of the consultation?”. Moreover, nothing goes forward—in my time, at least—without the RPC putting its imprimatur on it. It was not a trivial process at all.

What is going to come in its place is something that is gutted and stuffed. The threshold is going to be raised from £1 million to £5 million. Perhaps it is also important to note that that is £5 million net, so bearing in mind that this is self-certified, a department could say, “Well, it might look like £10 million but actually there’s £5 million on the other side that you can’t see, so it comes in below the threshold”. The RPC will have no capacity to call that decision in or to challenge it in any way at all. That is perhaps one foretaste of the risks we run if this system goes ahead. We had another foretaste yesterday in the debate on the Sanctions and Anti-Money Laundering Bill where, as the noble Lord, Lord Ahmad, said from the Dispatch Box, the proposition is that Ministers should be left to fill in all the blanks in accordance with their overall duties as Ministers. Naturally, all that will go absolutely fine.

That certification is not so much self-certification as self-satisfaction. I listened to some members of the RPC this week, and it is clear that business does not like the loss of that monitoring process. It fears uncosted and untested changes that are made by well-meaning civil servants and nodded through by busy Ministers who are only too happy to cut a month’s faffing-about with the RPC to get something done quickly. The consumer watchdogs do not like it either because of the risk to standards, about which a number of noble Lords have spoken. Surely the move towards a self-certified, unmonitored and unsupervised process in the hope that the overall duty of care or fitness for purpose rules will be sufficient is shot down in the light of banking regulation and Grenfell Tower regulation. In different ways, those two catastrophes were prompted by a failure of regulation. It was left to the good intentions of people who did not put things into practice.

There are therefore some strategic points for the Minister to consider. As I hope the noble Baroness, Lady Neville-Rolfe, will agree, he needs to understand that pragmatism, proportionality and risk should be taken into account rather than an ideological aversion to regulation or, indeed, ideological commitment to a precise number of regulations. There should be holistic costings of all the measures that government proposes and this House considers, with rigorous testing of the propositions by either the RPC or a better and stronger alternative. We also need to make sure that taxation and other matters are clearly taken into account. Finally, and for immediate action, will the Minister please tell us what the Government will do to reverse the drastic cuts to the RPC and the damage that that will do to the capacity of Ministers and this House to keep track of where regulation exists and what it is doing to our country?

--- Later in debate ---

[Lord Henley]

I think the noble Lord is referring to another letter. The postal service has been quite busy. I will come to the comments of the Public Accounts Committee in due course. I am referring to what amounts to a leaked document.

[Lord Stunell]

The Minister talks about coming back to this in due course, but I understand that the new regime is in place now. Is there a hiatus between the new regime and him coming back to consider matters?

[Lord Henley]

The noble Lord is correct that the new regime is in place, but that does not mean that all proposals are finalised; these matters can always be considered in the light of representations made, even by the noble Lord. He and I were in the coalition Government together; we worked together in the past. I am sure we can take account of comments made here, and I would be more than happy to listen to him.

I want to make it clear—not commenting on leaked documents—that our proposals actually increase scrutiny by bringing significant deregulation measures into scope. They focus the system on measures with large impacts. This brings me to the Public Accounts Committee, whose recommendations it is worth commenting on. The 2016 report said:

“The Better Regulation Executive’s rules for assessing and validating the expected impact of a regulation are the same, regardless of the scale of the regulation’s impact. The Better Regulation Executive … has established a complex bureaucracy across Whitehall that diverts departments’ resources away from potentially more productive efforts … Of the 95 regulations that the Regulatory Policy Committee has scrutinised during this Parliament, 64 of them have an individual expected net impact of less than £5 million”.


The committee then recommended that we should change the rules to allow a more proportionate approach whereby significantly more effort can be applied to the assessment and validation of the small number of regulations with the greatest impact. That is what we are doing with the de minimis rule.

That is why we took this action and why I wrote to the Public Accounts Committee only last month to inform it that we intended to follow its recommendations and adopt a more proportionate and efficient better regulation system by introducing that threshold. Obviously, we can always reconsider those matters, but that is why I wrote. It will allow the RPC to focus on the measures that matter most. If it had been in force in the last Parliament, 90% of the costs would still be subject to independent scrutiny.

It is only right that regulation should be kept under constant review as products and technology change. Where regulatory requirements are not clear or easily understood, it can lead to confusion and potentially an increased risk to the public. Over the last 20 years, Governments have been working on getting the delicate balance or proportionality right and the costs and benefits of regulation right. That has included the establishment of the Regulatory Policy Committee, as I mentioned earlier, which gives independent scrutiny of the evidence for regulatory changes when they are debated in Parliament.

There were previous government initiatives to review the stock of legislation. Going back to the beginning of the coalition Government, which the noble Lords, Lord Stoneham and Lord Stunnell, will remember, there were the Red Tape Challenge and the cutting red tape reviews. The noble Lord, Lord Stunnell, took credit for introducing the one-in, one-out measure, which I think he accepted served a useful purpose in encouraging the process, even if another noble Lord—I think it was the noble Lord, Lord Whitty—did not like the idea and said that it led to getting rid of something purely for the sake of it. But it encouraged the others and served a useful purpose.

Those reviews sought views from the public to help identify outdated, unnecessary or overly complex legislation and led in due course, as both noble Lords and others will remember, to the Small Business, Enterprise and Employment Act 2015. My noble friend will remember that because she took the legislation through the House. It introduced a requirement for the Government to set a business impact target, focused on the economic impact of regulatory change on business activities, and the need to report annually on its achievements against that target.

These initiatives have delivered some real improvements in how people, businesses and public bodies are regulated, and have also encouraged a cultural shift in government departments towards more appropriate and smarter regulation. The one-in, one-out or one-in, two-out proposals played a part in that. For example, my own department’s business perceptions survey last year showed a decline in the proportion of businesses that believed that the overall level of regulation in the UK was an obstacle to their success. It went down to 49% in 2016, from 62% in 2009.

As I said earlier, the Public Accounts Committee produced a number of recommendations about how we can further improve our regulation system, following the report from the National Audit Office last year. We have been reflecting on those conclusions, including ideas about how to make our approach more proportionate.