(6 years, 5 months ago)
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Baroness Neville-Rolfe
To move that this House takes note of Her Majesty’s Government’s plans to ensure that regulation is balanced, cost-effective, easy to understand, and properly enforced.
Baroness Neville-Rolfe (Con)
My Lords, I am sponsoring this debate because regulation plays an important part in all our lives, both for good and, unfortunately, sometimes for ill. In recent decades, successive Governments have recognised the cost of regulation and sought to minimise it while still gaining the associated benefit. Recent initiatives are very well explained in the report that the House of Lords Library has helpfully produced for this debate. I thank the Library for it most warmly; it will prove invaluable, and not only for this debate.
To be clear, I fully agree that important steps have been taken in recent years to ensure regulation is justified and proportionate. Despite this, as is often the case in human affairs, we need to run to stand still. Even so, and despite the apparent political consensus I have described in favour of reducing the burden of regulation, I sometimes detect a common view that regulation is virtuous in principle and that those of us concerned to reduce it are somehow working for an ignoble cause. I believe that to be profoundly mistaken. Regulation in general is, I agree, a necessity. But specific examples are frequently unnecessary; regulation often inhibits freedom and economic activity, making us all poorer. Therein lies the rub. There is nothing for it but to try to find the correct balance, and the way forward is rarely completely obvious.
Today, I do not want to run through the history of regulatory policy, but to raise concerns and to make some general observations that have occurred to me ever since, as a civil servant, I headed the deregulation task force under my noble friend Lord Heseltine. Identifying ongoing problems can be a first step to finding a remedy. In particular, I want to bring to the House’s attention the possible link which I believe exists between disappointing productivity and bad, or poorly enforced, regulation. Then I will turn to the issue of what steps we can take to improve matters. This will be especially important very soon, when we are faced with the tide of regulatory implementation arising from Brexit. We need to find a way of scrutinising it well in this House.
I start with the problem—indeed, puzzle—of low productivity, which has been extensively addressed in this House and in the other place during the Budget debates. The flatlining in productivity that we have seen since 2008 is something of a mystery, like TS Eliot’s cat. I have been reading closely the official papers on the matter from the ONS—not a task yielding a laugh a minute. A brief summary might be that the problem exists, but the exact cause or causes have not been proved. Likely culprits identified by informed observers include poor education and skills, inadequate infrastructure, insufficient housing and R&D, and the impact of digital on revenue and national income statistics.
I believe, however, that the wrong kind of regulation, an excess of it and a tendency to dream up new regulations in response to crises are also contributors. Rather than enforce existing regulations properly and learn from our mistakes in the kind of continuous improvement that I know from my time in retail, too often we see a failure to monitor existing rules and then very costly and intrusive regulation. My objection to the wrong sort of regulation is that it is inefficient, diverting of effort, irritating, time wasting and often expensive for those regulated.
My first example is Grenfell Tower. This was an appalling tragedy of a kind that should not occur. The facts are being carefully examined and there will be a forensic report, but I highlight three apparent regulatory failures from which we might learn. The most serious to my mind was to bring in for tower blocks building regulations that exempted the refitting of old blocks from the requirement to install sprinklers, as required in new blocks. The second was to require new cladding with a focus on energy saving to meet public sector climate change targets, and not to think enough about fire safety. The third was to have a Cinderella system of enforcement of the fire safety rules rather than well-trained professionals.
Cinderella enforcement has been an issue in many of the regulatory scandals of my lifetime, examples of which are Nestlé baby milk contamination, which closed the relevant Cumbrian factory for ever; local authority enforcement of BSE rules; and foot and mouth. For success you need a good enforcement system, and the Health and Safety Commission and, later, the Food Standards Agency have done a reasonable job, with trained staff and a system of simple, easy to understand guidance and a policy of issuing improvement notices before businesses face prosecution. Sadly, local environmental health and trading standards are not given the priority they should be.
Another good way to achieve compliance is to have industry schemes that act as an incentive to virtuous behaviour. An example—a good one, I hope; and I declare this and my other interests in the register—is the red tractor assurance scheme appearing on some £13 billion-worth of British agricultural produce. Had my noble friend Lord Lindsay been able to be here, he would, I know, have talked more broadly about other UKAS-accredited conformity schemes, because they have been used successfully for many years to support government regulatory policy and a risk-based approach in a wide range of important areas such as environmental management, food safety and quality, and healthcare services.
My second example is financial services. The UK’s establishment of the Financial Services Authority was, to my mind, a mistake. My experience at Tesco was despair at the micromanagement it imposed on the detailed wording of consumer products while apparently neglecting investment banking and sub-prime. Regulators should have economic spectacles: they should care about growth and innovation in the economy, but they should also be wary of wealth creation that seems too good to be true. After the crisis, all that changed and, arguably, there has been regulatory overreaction—all very well meant, no doubt—and a double banking of UK and EU regulation. This growth of regulation has been introduced in part to tackle money laundering, but it is sometimes done without regard to common sense. My husband has looked after the affairs of an elderly aunt confined to a nursing home for many years, yet he is often asked to provide proof of her existence and her bona fides.
Having said all that, the new financial services regime is much better than it was in the FSA era. The FCA and the PRA are now in effect part of the Bank of England and can attract better staff as a consequence. They are more strategic and did well in the weeks after the Brexit vote. The FCA has rightly been praised for its work on fintech, with the regulatory sandbox providing a light regulatory regime for start-ups, which has impressed internationally. They now face a new difficulty: the need to secure some form of bespoke deal in the Brexit context. Because of the importance of a Brexit deal for financial services, there is no appetite for lighter regulation. Indeed, I worry that the rules could end up being more onerous. The risk then must be that global operators will decide to move business to New York or Singapore. We need to be a force for good in regulation in the EU while we remain in it, and in supranational discussions and bodies thereafter. Our influence is important.
My third example is product safety. I have previously highlighted the case of Whirlpool tumble driers that burst into flames. Whirlpool, a US company, was in my opinion slow to take its safety responsibility seriously when it emerged that there were 5 million dangerous machines in British homes. I understand that about half have been fixed. We know from debates on the then Consumer Rights Bill in 2014 that the product recall system in this country is not up to scratch. There is a simple solution—central resource and central responsibility, not for all consumer safety, which rightly sits with local authorities, but where we have major national product recalls as faced by Peterborough with Whirlpool. We need a major, centralised enforcement effort in such cases. I was rather hoping that the Minister might agree.
My fourth example, very briefly, is Volkswagen, which was again an appalling example of poor enforcement, not the wrong basic standards or laws. We do not have time to go into this case in detail, but I wonder whether the problem was in allowing manufacturers to set the performance tests rather than requiring independent certification.
Finally, I am following the Data Protection Bill through our House at present and I predict that the scale of the new burden it imposes will eventually cause a backlash of complaint. New rules will apply to pretty well every business or private sector organisation in the country, regardless of size, which collects or holds data about identifiable individuals—that is most small businesses and charities; not a happy situation. We must do what we can to help them.
What do we do about all this? I speak as someone who has spent half my life fighting red tape, sometimes with success. When I ran the Deregulation Unit aeons ago, we had a mantra which I think we could revive: “Fewer, better, simpler”. As Winston Churchill said,
“If you have ten thousand regulations you destroy all respect for the law”.
The Federation of Small Businesses says that regulation is a top priority for its members. In a recent survey, two-thirds of them thought that the costs outweighed the benefits in terms of reduced profitability, productivity, innovation and so on. They are especially concerned about the flow of new regulation and a de minimis rule that might be coming in for impact assessment. I hope the Minister will be able to provide them with some reassurance.
What else can we do together to make things better? First, we should recognise that regulation, while often necessary, is a cost that hits the bottom line of businesses and diverts management effort. We should be up-front about this. We need impact assessments available to Ministers and senior officials on new rules and regulations before key decisions are taken. The assessments should be realistic and simple and should reflect dialogue and consultation with the real economy, and quote the names of companies or bodies affected and what they think. The independent Regulatory Policy Committee has done good work on economic assessments and business impact, as the NAO has acknowledged. However, it lacks political edge and is somewhat undermined by the fact that its processes do not apply to burdens coming from the EU, to tax or to the national living wage. The NAO suggests that when these are added in, the regulatory burden has actually been increasing, despite the various targets such as one in, two or three out. Perhaps proposals with increased regulatory costs might be required to be approved by a Minister, as is the case with expenditure proposals. He or she could be defined as a champion of lower regulatory costs. A good system is all the more necessary given the great tidal wave of replacement regulation coming our way with Brexit. The process needs to be refreshed, and the moment for that has come.
Secondly, and linked to that, we need to be champions of good, simple, inexpensive regulation across Europe and in international fora.
Thirdly—and this would appeal to most politicians in free countries—we should think small first. It is sometimes possible to have exemptions, such as the VAT ceiling, but we should ensure that administration for smaller firms is clear, simple and online and that charges are lower. Indeed, they often might not be worth imposing at all when you allow for the administration costs. At Tesco every invoice cost £25, so in many cases it paid to be generous. There are millions of SMEs, small charities, trusts and small public bodies such as parish councils and primary schools, who will love us if we can make the regulatory burden easier.
Fourthly, regulation must be easy to understand. The growth in complexity is good for the lawyers and consultants, but in the modern world there is no excuse for a lack of simple clear rules and information.
That brings me to my final recommendation: enforcement matters. As my tale of Grenfell Tower showed, enforcing and resourcing our regulatory systems needs to be an essential part of our deregulatory approach. Again, the Brexit changes give us an opportunity to review this aspect.
I note in closing that unfortunately, none of these ideas appears in the recently published industrial strategy. Indeed, regulation barely gets a mention, despite its importance to productivity. Robert Bork, a famous US lawyer and judge, said that:
“As government regulations grow slowly, we become used to the harness. Habit is a powerful force, and we no longer feel as intensely”,
yet what is proposed would have been “utterly intolerable” in former ages. That could be a prescient warning.
Baroness Andrews (Lab)
I am grateful to the noble Baroness for creating another opportunity to discuss this very important matter. I agree with much of what she said. We have never been at a more important time in carrying out our role to regulate properly, proportionately, wisely and transparently. I am going to pursue a rather different tack this morning.
Even under normal circumstances, the minimum that we should be able to expect from the Government in their approach to regulation is not merely that it is proportionate, providing the right level of safeguarding and reducing the sort of risks that need to be reduced, but that it is transparent enough for everyone to have confidence in and robust enough to invite and withstand scrutiny. I hope that the Minister agrees.
My questions to the Minister today—there are quite a lot—will test whether these assumptions still hold in the light of what the Government plan to do to reduce the scope and functions of the only independent verification body which advises the Government about regulation: the Regulatory Policy Committee, created in 2009. In July I led a debate on regulation, which followed many of the same lines as the noble Baroness. This afternoon it is different. At the end of the debate, the Minister responded to me, in an unsatisfactory way, that the system of regulation was under review. Naively, I thought that that might mean a review which could lead to some improvement. There is common and cross-party agreement that we need to improve the system—to strip out what is redundant, ambiguous and obstructive—and to standardise practice without losing quality. That was the line taken by the Public Accounts Committee recently, when it said that the Government should adopt a more proportionate and efficient better-regulation system.
What has happened in fact, and which is deeply alarming to noble Lords across this House and to industry, is the opposite. Possibly under cover of the challenges of Brexit, possibly driven by it, the Government are planning to reduce the powers of the one independent body which is set up precisely to ensure that regulatory changes planned—whether to create or annul regulations —have the impacts claimed for them. We are talking only about business impact statements here—the very basic currency which has governed the accelerated approach to deregulation in recent years. These changes are planned and are under the radar. Apart from a letter to the chair of the PAC delivered last week, none of them has been publicly revealed, let alone discussed or consulted upon, not even with business interests. Each of them reduces a different part in the process of careful scrutiny and each has massive implications for small businesses—and very much for this House and the way it conducts scrutiny.
The three changes are, first, that the Government plan, as the noble Baroness, Lady Neville-Rolfe, said, to impose a de minimis bar of £5 million on what the RPC will look at in the future. This will have the following effect. Between 2015 and 2017, the RPC looked at 700 measures. Had this new regime been in place over the past year, it would have looked at only 18 measures, and it would be for government departments to self-certify those measures as to which side of the de minimis they fall on. This will reduce the work of the RPC by 90%. Had these measures been in place in recent years, the RPC would not have been able to review important regulations relating to fracking, night-flight restrictions, gender pay-gap reporting, pesticides and water quality, to name just a few. That is only one sort of impact.
The Federation of Small Businesses has been in touch with me as well. It says:
“There are rumours that government are introducing a higher de minimis threshold for scrutiny of impact statements”.
How right it is. In its briefing, it asks me to ask the Minister to provide clarity on this and when he will consult on it. Can the Minister ensure that in the wind-up he answers this question? The federation says:
“Our members cite the cumulative burden of regulation as a key problem, and so we are concerned that this change will allow more regulation to slip through the net unscrutinised, adding to the burden rather than reducing it”.
Exactly. Changes which look minor in themselves, which affect every hairdresser in the country, may well not add up to £5 million so will not be scrutinised—but they affect every hairdresser. That is what the FSB wants information about.
The second change is related to that. The Government have changed the terms on which measures of any size can be examined. With the introduction of de minimis, the RPC was concerned—rightly—that controversial measures could slip through, so it was working with the BRE to introduce powers of call-in to pick up controversial measures that would have a perverse consequence, whatever that might be. This, I understand, has now been abandoned as an idea. There will be no provision to call in any controversial measures that fall below the minimum. In a letter that I have seen, sent by the Minister to Cabinet colleagues, this is simply described as being,
“to enable the BRE to work with Departments to avoid unnecessary parliamentary handling risks”.
Thirdly, the Government have decided to abandon the mandatory first stage of consultation, which was developed by the RPC to spot and iron out mistakes, to the advantage of business and societal groups. This would provide greater departmental autonomy, with only one final cliff edge of confrontation. This proposition had been put forward before but was rejected by the then Cabinet Office Minister, Oliver Letwin. Business is very unhappy.
These are my questions for the noble Lord. Can he explain why the Government are reducing the power of the RPC to a minimal, possibly unsustainable, level at a point when its regulatory function needs to be at its most alert? Can he confirm that these changes are not under consideration but are well past that stage and that, unlike what he said to me in an Answer last week, they have been put into effect without public consideration, debate or review? Can he explain why this has not been brought to the attention of Parliament, let alone our scrutiny committees that deal with secondary legislation? Can he explain why he has not consulted business? Can he tell me what the job description of the new chair of the RPC, announced yesterday, in place of the gentleman who has been doing the job for many years, Michael Gibbons, will consist of? Does Mr Browne understand that, if these changes go ahead, there will be virtually no job to do?
I have already put one question to the Minister from the FSB, and here are two more. When will the Government consult on a new business impact target, which is required within a year of a new Parliament? We are now half way through it. When can we expect confirmation of the appointment of the independent validation body? Those are all questions well within the scope of the Minister, and I expect a reply at the end of the debate.
Finally, exactly what role and process do the Government now envisage for the RPC in relation to the Brexit process—not just in terms of the transposition of EU regulations but in terms of the generation of new regulations as a result of the negotiations or beyond? Are we to understand that this scrap of a body that will be left is to be charged with this crucial part of our future, or will more changes, of which we have not been informed, be sprung on us? When I heard about these changes, I found it very hard to believe that even this Government would make them without informing their eyes in business—the people who have to implement them—and this House.
I have mentioned Brexit and the chilling effect it is having across government. It is also a potential means of evasion and excuse and of doing things that might go unnoticed. We must be exceptionally alert to this. The RPC has been entirely dignified and silent about its treatment. This is no way to treat good public servants whose only concern is for good public policy. We ought to be able to look for a regulatory system which is robust but is also concerned with the social—not just business—impacts, and which is statutorily based and protected, and championed by a leading Minister.
This is not a personal agenda; these are issues of enormous interest across the House and outside, and I look forward very much to the Minister’s response.
Lord Stoneham of Droxford (LD)
I, too, thank the noble Baroness, Lady Neville-Rolfe, for leading this debate. She has huge experience in this field, starting as a government official, then working at Tesco, particularly in retailing and consumer protection law. I suspect that she spent a lot of her life in Europe dealing with regulatory matters, and she has now gained the skill of leading legislation in this House.
Those of us who have spent a lifetime in industry should and do understand the importance of regulation to ensure that fair and free competition exists and that staff and consumers are protected. I have worked in three industries—the coal industry, construction and newspapers. The one Act in my generation that stands out is the Health and Safety at Work etc. Act. I worked for the Coal Board in the 1970s and had the task of drafting the letters for the chairman of the Coal Board to send to the families of miners who were killed in accidents. I reckon that they averaged about 40 a year. Looking back, it was an unacceptable figure, but it shows that we required in this country a substantial movement in health and safety practice. In the coal industry, we probably used to assume that accidents were inevitable, but in my working career I have never assumed that any accident should happen.
Construction has already been mentioned in this debate. Compared with 40 years ago, construction has undergone a transformation. Grenfell is obviously a failure, and we will find out much more from the investigation currently taking place. However, it is not a question of less regulation but of getting better regulation to deal with some of the problems that will clearly be unearthed when the inquiry is conducted and completed. Every incident that we have in health and safety has to be tested and examined so that we can develop regulation and improve what we are doing. Just as important as regulation is the culture, which is one of the things that the Health and Safety at Work etc. Act changed. I particularly admire the culture of the aviation sector with its drive to examine every incident and encourage a culture of no scope for improvement in its safety audits—because it knows the consequences of having a margin of error.
My principal industry of newspapers was not unsafe. But I particularly appreciated the area of competition regulation in a sector that was consolidating through mergers at the time. There were considerable opportunities for price fixing, collusion and muzzling competitive forces. They were endemic—but for the fact that there were regulations and competitive authorities to keep an eye on what was being done.
As someone who has worked in industry through most of my career, I certainly believe in keeping regulation simple, up-to-date and easily understood. But it needs to be said, as was stated in the briefing material, that the OECD regards this country as having relatively low levels of regulation compared with other member states. One of the principal sources of comparative advantage for this nation in attracting foreign investment is the system of fairly low-level regulation compared with other countries. That is what has attracted foreign investment into this country, from companies needing to sell their goods in the European market.
It is particularly important for small businesses that we keep regulation simple and effective, because they have the most difficulty in keeping up with regulation. We need their powers of innovation, growth and transformation to contribute to our economy. I certainly am not one of those who propose—indeed, we should strongly oppose—any concept that this country should develop down a Singapore route, with less regulation and unrestricted free enterprise, as a way of developing comparative advantage once and if we come out of the EU.
The coalition made some progress in trying to simplify our regulation policies. There are times when you need slightly more PR-type initiatives such as “one in, two out” or “one in, three out”, because that is a quite effective way of bringing about change in organisations that are not facing up to the need for it. But actually you need more effective long-term measures rather than simply changing the name of the campaign from “Cutting Red Tape” to the “Red Tape Challenge”. Having business impact targets and trying to improve government departments from within are important initiatives.
However, there are a number of problems, one of which is that in order to set realistic targets, you need to include in them the things that matter. I know that the Government have resisted this for a long time, but tax administration being outside the initial impact assessments is ludicrous because most small businesses certainly see the burdens of tax administration as being probably the largest impact that they have to face. They are not going to take much notice of campaigns that try to sideline the things that add most to their costs. Although I support them, we also have to include the national living wage and the national minimum wage so as to indicate where burdens are being put on business in order to get a true impact analysis of what regulation is doing—even when there are downsides to measures that most of us strongly support.
Finally, I want to say a little about the global dimension. The future for this country is very much about international trade and data. This week, I took myself off to look at the impact studies that the Government have produced. It was an amazing experience. You must make an appointment and be met at the Treasury. You have to give up your phone and sign your life away and promise that you will behave yourself, and then you get to see these studies. There is absolutely nothing new in those studies apart from emphasising the huge complexity of what the Government are leading us into with Brexit.
One phrase did catch my imagination. I started at A and looked at agriculture. It stated: “A key consideration is that the cross-border trade between Northern Ireland and Ireland is particularly complex and sensitive. The food and drink industry between the UK and Ireland is fully integrated and treated as a single trading unit by business”. Some 10 European systems apply across the agricultural sector, along with 15 relevant agencies. Good regulation will be vital to the flow of goods in the future. Regulation is particularly essential in this industry because when there is a problem, it helps to have good regulation so that businesses can recover quickly and continue to have free movement.
The Government are facing a huge task of converting all the European regulations which apparently are now going to come under our own auspices; it will be a huge enterprise. When moving house, most people clear out the loft first—but we will have a system where the withdrawal Bill will come in, then we will amend it so that we have a transition Bill, and presumably then we will then have to work through all the regulations to ensure that we are in control. What we also have to decide is which European regulatory agencies will apply and which we will participate in. We are half way to Brexit, with 18 months to go. Do the Government have a plan as to which of these agencies they are going to participate in and which they will duplicate? In my experience, it can take two or three years to set up a new department or regulatory agency, and I think that the country deserves to know.
The country could do with increasing scrutiny of regulation, but in a debate with the noble Baroness, Lady Neville-Rolfe, when she was in the Government and defending against various amendments that we had proposed, I said that she was Stonewall Jackson in her defence of the Government. However, I warned her at the time that Stonewall Jackson was killed by his own troops. For all her aspirations on regulation, the difficulty is that, with the huge mountain of work that the Brexit operation will involve, simplifying regulation will be put very much on the back burner.
Lord Whitty (Lab)
My Lords, I heartily thank the noble Baroness for introducing the debate with her usual clarity—not that I agree with everything that she says. I agree with a fair part of it, but there are some aspects with which I do not.
As she said, five months ago, we had a debate on regulation in the name of my noble friend Lady Andrews. That was almost directly in the wake of Grenfell Tower, which, as she said, was a lethal cocktail of failure of regulation, regulators and enforcers to fulfil what is generally regarded as the first duty of the state: to protect its people. In that context, I gave a fairly fundamentalist speech to your Lordships about the attack on regulation, which was often under the guise of better regulation. I declared myself then to be a defender of the nanny state, and I remain unashamedly so. In these slightly more relaxed times, perhaps I should explain that I was in favour of a nanny state that was strict, fair and child-friendly, rather than the opposite. Nevertheless, I stand by my words. I can do no other.
Yet I recognise the need both for constant vigilance about the nature, quality and quantity of regulation, and for the real and positive better regulation agenda. I understand that to be the noble Baroness’s agenda. We need regulation that is accessible, not overly complex, clearly focused on outcome, intelligible and proportionate. Noble Lords will notice that I use the term “proportionate” rather than “balanced”, as in the noble Baroness’s Motion. They are not the same thing. “Proportionate” means not excessively costly or restrictive, relative to the prime objective of the regulation. “Balanced” implies that there is a trade-off between the objective and other objectives—particularly economic costs. That is not the objective of regulation. For example, if a substance or process can be lethal then we need to stop endangering human—or in some cases, animal or plant—life. That is the focus and objective of regulatory intervention in the first place. We should do so based on risk and in the most efficient and cost-effective way, but not by compromising the prime objective. Therefore, it is a question not of balance, but of proportion and adopting the most cost-effective and best available technology to meet the objective. Later today, there is a debate on the natural environment in which I will make a few remarks about pesticides. I will leave those remarks for noble Lords who can stand two interventions by me on the same day.
In a wider context, I am concerned about the Government’s approach to transposing a whole corpus of EU law into British law. The European Union (Withdrawal) Bill will be before your Lordships in the new year—quite how early is not yet entirely clear. It is time to put up a few markers. I fear the combination of the unprecedented need to rewrite and change the status of such a wide swathe of law and the political tendency influencing the Government—I was going to say within the Government—and of those who seek to use a post-Brexit scenario to move to a UK economy based on minimal regulation, perhaps under the guise of better regulation. They denounce the nanny Euro-state and put our physical security, fair treatment at work and in society, and the future of our landscape and biodiversity at risk, in order to cut regulatory costs. They insist on light-touch regulation or thin self-regulation and reduce the powers of regulators and cut their resources—allegedly so that the UK can compete in a ruthless world market. That is not my vision of post-Brexit Britain, but it is one that has an uncomfortable resonance in some circles not far from the centre of power—for the people more comfortable with regulatory alignment between the UK and Texas than between Armagh and Dundalk.
Already over the last decade, under successive Governments of all hues, we have seen examples of cuts in the powers and independence of, for example, the Health and Safety Executive and the Environment Agency. More recently we have seen a serious diminution in the resources at local level for trading standards, as the noble Baroness said. Under the guise of better regulation, we have also seen what I regard as the quite absurd mechanistic formula of one in, three out, supposedly to reduce the burden on business, but in fact introducing another completely nonsensical trade-off.
In the Brexit Bill we see the necessary literal transfer of the wording of directives and regulations, but without, as it currently stands, the guiding principles of European regulation that exist in the treaties or, in some cases, in the preambles of directives and regulations. We are withdrawing from the treaties and English lawyers do not like the concept of preambles, but we miss some very important principles by not translating them into English and Scottish law, for example on fundamental rights, sustainability and the precautionary principle, which, as the Bill stands, are not being transferred, although the detailed regulations are. Nor is it clear from the Bill how the regulations, which hitherto have largely relied on European-level enforcement, are to be enforced on the British economy and public institutions post Brexit. I hope your Lordships will have the opportunity to get that right when we receive the Bill.
However, let me be a bit more positive about the agenda that the noble Baroness has set out. Indeed, over her lifetime she and the noble Lord, Lord Curry, who is about to speak, have spent a long time looking at the positive side of better regulation—a painstaking process of updating, simplifying and reducing overlap; challenging half-baked cases for new regulations, of which there are far too many; cutting complexity; and, yes, avoiding unnecessary cost, particularly the administrative cost on small businesses. That is not so much the cost of compliance as it is the overhead burden of administration.
To help the process, successive Governments have established a precise, independent and effective method of checking and doing the necessary weeding, certification and assessing of proposals from departments for new or revised regulations. It has not been comprehensive, but where government departments have allowed it to operate it has been successful and has helped to ensure that new regulations have been more cost effective, accessible and workable. My noble friend Lady Andrews has already referred to the unfortunate rumours we have heard that part of that apparatus is being chopped off at the knees and that the role of the Better Regulation Executive and in particular the Regulatory Policy Committee is likely to be reduced—presumably, to put it benignly, in order not to jam up the process of transferral of European regulations through the Brexit process. I repeat my noble friend’s anxiety, because these processes have gained the confidence not only of those who are pressing for regulations but of those who would normally be very apprehensive about them, in particular small businesses. We are in danger of this process losing that confidence.
I worry that we are entering a period where people see the post-Brexit fate of this country as an offshore, low-regulation, low-tax, low-enforcement economy and society. By contrast, if your Lordships are interested, I have a whole list of areas where we should have better, more substantial regulation. On the environment, it should be on soil protection, air and water quality, and pesticides and fertilisers. In housing it should be on the private rented sector in particular and on building regulations. In the legal services, we should have a rather more independent system of regulation not wedded to the professional bodies.
So I, too, have an agenda which may appear to go in the opposite direction to that of the noble Baroness, but I hope that any new regulations in that area meet many of the principles that she has expounded today. I hope that the better regulation process hereafter, in particular through the tedious and complicated process of transferring European regulations into our own laws, meets genuine better regulation objectives and is not, in effect, putting our society at greater risk.
Lord Curry of Kirkharle (CB)
My Lords, I welcome this debate and am grateful to the noble Baroness, Lady Neville-Rolfe. I must begin by declaring my interests. I farm in Northumberland and, as the noble Lord, Lord Whitty, said, I chaired the Better Regulation Executive from 2010 to the end of 2015. In that time, I was responsible for the adoption of the one-in, one-out and one-in, two-out processes, as well as the Red Tape Challenge and focus on enforcement programmes. Collectively, these initiatives led to a reduction in regulatory costs for business of around £2 billion per year, as confirmed by the Regulatory Policy Committee—a significant development for the business community at that time. When I took the chair in 2010, 62% of businesses regarded regulation as an obstacle to progress. Five years later, this figure had dropped to 51%. The programme was successful and brought greater discipline to government departments and their legislative ambitions. It definitely stemmed the flow of new regulations. I supported then, and still do now, the principle of establishing a business impact target introduced in the Small Business, Enterprise and Employment Act 2015, which we debated at length in this House. However, this needs to be realistic, and the cranking-up of the challenge from one in, two out to one in, three out in 2016 was a step too far.
The noble Baroness, Lady Neville-Rolfe, referred to the tragic Grenfell Tower disaster. The building where our own apartment is, a 10-minute walk from here, apparently has 40% coverage with the same offending panels and in construction may have contravened building regulations. It was rebuilt in 2003, long before the one-in, two-out policy was introduced in 2011. I question whether there is still a systemic issue within the construction industry.
I am absolutely clear that the programme we put in place did not put lives at risk or undermine confidence in our regulatory systems. In fact, as was stated by the noble Lord, Lord Whitty, it is perfectly possible to remove regulatory burdens that benefit employers, businesses, employees and citizens by adopting smarter processes and better-targeted inspections. Enforcement can actually be enhanced.
Today’s debate focuses on the need for regulation to be balanced or proportionate, cost effective, easy to understand and properly enforced, and I support that objective. We need to protect UK citizens, their health and well-being, our environment and natural capital, while creating a favourable business environment. This will be even more important post Brexit. It is crucial that businesses continue to want to reside here in the United Kingdom, to build capacity here and to contribute to our economy after March 2019.
According to the World Bank, the UK is currently the seventh most favourable country in the world in terms of ease of doing business—this is an important benchmark for us—and we want to ensure that we continue to be at the forefront of global business, positioning ourselves as the best place in Europe. This must be in terms of the ease of establishing a business as well as the ease of growing a business.
As the EU withdrawal bill is going through the Commons and heading in our direction, it puts us, as the Prime Minister has said, in an unprecedented position. We have no choice initially but to translate EU legislation into domestic law, but we should take the opportunity to simplify, consolidate and reduce the volume of guidance notes wherever possible to suit our circumstances here in the United Kingdom. However, we must also recognise that we will not be able to access important markets unless we have appropriate regulation in place. Having concurrent regulation with the European Union will help to pave the way for our future trading relationship. The wishful thinking of some Brexiteers that we can demolish regulation at a stroke when we leave the European Union and still trade on the global stage is naive. We need to strike a balance. It will be important to have at least equivalent standards with other countries and the EU if we want to maintain our business relationships. In fact, we need to present ourselves as having high standards of compliance and make a virtue of our regulatory standards. Our own British public expect us to have meaningful and appropriate regulatory standards in place.
Given my particular interest in the agricultural sector, which I am delighted has been mentioned twice already, I could not speak on this topic without referring to the impact on agriculture. I fully agree with comments about the red tractor scheme; these voluntary schemes provide valuable evidence of the status of farm businesses and allow for a policy of earned recognition to be applied to inspection regimes. There is no question that this issue of regulation and bureaucracy is one of the reasons that many people voted to leave the European Union, particularly the farming community. The assumption is that about 40% voted to leave.
In the design of our post-EU agricultural policy, we need to make sure that we reduce the complexity and bureaucracy which has been a feature of the common agricultural policy. We have a chance to create simpler, less onerous structures and we need to take that opportunity. We must resist the temptation to surrender to complex admin systems. The Defra Secretary of State, Michael Gove, has stated that he will establish a new environmental regulator to replace the accountability currently residing with the European Commission to hold government to account. I support this requirement but in doing so government must review the regulatory landscape, in parallel with this decision, and seriously question whether we need three environmental regulators. How confusing would that be?
Finally, I will comment on the structure in place to manage and administer the Government’s regulatory policy. The Better Regulation Executive has a hugely important role but it does not have executive powers, so the title is slightly misleading. The Regulatory Policy Committee also has a crucial function, as was highlighted by the noble Baroness, Lady Andrews, and the noble Lord, Lord Whitty, in auditing economic impact assessments. It is essential in monitoring the business impact target but does not have influence on policy and is not truly independent. Both bodies are subject to the whims of Ministers. The responsibility within government is split between BEIS and the Cabinet Office, while the BRE has not had an independent chair since I stood down in 2015. This structure does not provide sufficient independent challenge. It provides less than in the past, it is potentially confusing and there is overlap. It should be reviewed as a matter of urgency, particularly in light of the huge workload as a result of the withdrawal Bill. As has been mentioned earlier, EU regulation has been exempted from the current scrutiny by the RPC. This will not be the case when we leave the European Union.
When I chaired the BRE, I firmly believed that tax administration should have been included in the target and subjected to the same RPC scrutiny. I still believe that and firmly agree with the Federation of Small Businesses. My view is that we need an even more effective structure to monitor regulation going forward than we have today, not a lesser one.
Baroness Altmann (Con)
My Lords, I congratulate my noble friend Lady Neville-Rolfe on securing this important debate. The Government are right to want to reduce regulatory burdens and I commend their intention to do so. I also agree that if we are to have mountains of statutory instruments placed before Parliament as a result of Brexit, somehow the time devoted to new regulatory legislation will need to be controlled. There are only a limited number of hours available. I support the Government’s aim to introduce a more proportionate and efficient system. A somewhat more permissive and hopefully simplified regime is understandable. However, we must be concerned to ensure that we do not then allow all departments a free-for-all to certify measures as having an impact on business of below £5 million and thus bypass scrutiny.
As the noble Baroness, Lady Andrews, rightly outlined, there is concern if the impact assessments coming before the Regulatory Policy Committee are truly going to fall from around 700 to around 18. We must surely not reduce our efforts to protect the public, so random assessments of departments’ measures that are not put before the Regulatory Policy Committee are surely absolutely essential. Indeed, rather than diluting the RPC, I wonder whether we should beef up its powers and whether now is the time to consider putting it on a statutory footing, as I believe happens in other countries such as Germany, Norway and the Netherlands, or awarding it independent verification body status. Will my noble friend let us know whether such measures might be under consideration?
In addition, will my noble friend reassure the House that, when making impact assessments, the impact on the public will be more carefully assessed than appears often to have been the case in the past? Additionally, I believe that although there is a laudable intention to ensure that regulation is regularly scrutinised to ensure that it is working as intended, the promised post-implementation reviews have been relatively few and far between. The purpose of regulation is largely to protect the public and wider society, so the absence of sufficient checks is surely of concern when deciding about the impact of regulation.
I am particularly concerned that departments may pay too little attention to the wider impacts on the general public. The department’s answer to Question HL3424, asked by the noble Baroness, Lady Andrews, states that,
“societal impacts … are agreed by senior civil service analysts and … signed off by Chief Economists”.
Is that really good enough? Surely the impacts on the wider public are crucial and require more independent input from user groups and others who are perhaps better placed, and certainly well placed, to judge the impact of those regulations. Perhaps we need to find ways to ensure that departments are incentivised to consider and produce such reports.
Regulations should also bear in mind the people who are using them and who are supposed to benefit from them. For example, it turned out that product warnings that something could be fatal were not well understood by the public and that changing the wording to “Solvent abuse can kill suddenly” was rather more effective.
The original idea was that we need regulation, but it would wither away in most sectors to be replaced by competition. However, in many cases there is just too much asymmetry between the parties involved and the public, so ordinary consumers need the protection of well-designed regulation to ensure that they are treated fairly.
An excellent example of such asymmetry in both information and power is, of course, in my area of pensions. Failure of regulation has too often had dire consequences. For example, it is almost 10 years to the day since the Labour Government, thanks to the noble Lord, Lord Hain, who was then Secretary of State at DWP, agreed to compensate steelworkers and 150,000 others who had lost their entire occupational pensions. Despite years of contributions and assurances that they were protected by legislation, it was discovered that those regulations designed to protect them had actually stripped them of their pensions entirely. The regulations were well-meaning, but failed. There are, of course, many other examples.
Too often, it seems that provider companies may have captured the regulators or the regulatory thinking. It is also important to listen to small firms, as my noble friend Lady Neville-Rolfe rightly said, and the impact on wider society must not be ignored. In that context, excessive complexity not only hinders economic activity and creates unnecessary burdens but also prevents consumers understanding what is going on and what regulations are meant to achieve.
However, there is little incentive to ensure simplicity or to avoid adding further to our already complicated web of legislation. A good example of how complexity can be damaging, particularly to small businesses, is in the area of automatic enrolment, where the rules are unbelievably complicated. For a large firm that can pay consultants to manage it all, it is fine, but for a small firm the complexities often cause enormous cost and concern. Simplification is an aim that I hope many departments will follow as we move forward, but there are too many examples in the pensions arena of where complexity has been introduced. I hope that departments will take note of that need for simplification.
Governments must ensure effective oversight of regulated industry, whether energy, nuclear, infrastructure and so on, and there are bound to be some interactions between political considerations and the regulations. Indeed, the complexities of competition and technological advances mean that it is important that Governments ensure regulated industries are operating to achieve the desired policy objectives. But for this to work well, transparency is vital, and transparency can be hindered by that complexity—or, indeed, by the frequent changes that so often occur.
Another example is in the residential landlord sector, where I must declare an interest as a private landlord. There are many important regulations—on gas, electricity and furniture safety, for example—but, despite this, there is inadequate enforcement by local authorities, as has been highlighted by other noble Lords. It is true that many councils have introduced licensing schemes to try to enforce the regulatory requirements, but the unscrupulous landlords do not join in.
In legal services, again the Treasury rightly says that independent regulation is important to make sure markets for essential services work fairly. However, the legal services profession is calling for regulation to be independent of the profession, in order to address not only any possible conflicts of interest but even the perception of such conflicts. The Competition and Markets Authority looked into the legal profession and confirmed that the independence of a regulator from the providers is a key principle that should be taken into account in any review of the framework. Can my noble friend the Minister say when the promised consultation on regulatory independence will be published?
Finally, we have skilled drafters and a professional Civil Service committed to reform and innovation and to effective regulation. But a note for civil servants raised a wry smile when I came across it the other day. After saying, rightly, that regulations should always be,
“transparent, targeted, consistent, and in proportion to the risk”—
absolutely correct—and calling for,
“incentives to encourage those causing the risk to change their behaviour”,
it goes on to say:
“Watch out, by the way, for the implications for middle class journalists. For instance, when designing policies affecting employees, think carefully about their impact on au pairs. Or when changing education policy, how will it affect Montessori schools? You attack the freedom of the press at your peril!”.
I hope, in the context of Brexit, that if we do proceed with this enormous task, the interests of the public will be paramount, rather than us just worrying about the media.
Baroness Donaghy (Lab)
My Lords, I remember that, when the noble Lord, Lord O’Neill of Gatley, put productivity centre stage, I said in a debate on the economy:
“I congratulate the Minister on emphasising the importance of productivity. If I were his public relations adviser, I would caution against setting himself up as such an easy target”.—[Official Report, 10/9/15; col. 1497.]
The noble Lord now sits in wistful self-imposed exile on the Cross Benches; admittedly, that is not related to productivity.
So when I saw that the noble Baroness, Lady Neville-Rolfe, had initiated a debate on regulation, I felt like handing out the same cautionary advice to her. As the Minister who steered the Trade Union Act through this House, I will say that trying to advocate that the Government should pursue a balanced approach to regulation is very bold. However, I doubt that she would want me as a public relations adviser. I will say that it is typical of her frank, human and no-nonsense approach that she has initiated this debate in the sure and certain knowledge that some of us will be in disagreement. In July this year my noble friend Lady Andrews initiated a debate, which has already been referred to, on deregulation. I think her speech was definitive on that subject.
I have direct experience of employment regulation, both as a trade unionist—a member of NALGO and Unison—and subsequently as chair of ACAS; I had in-depth experience of health and safety in the construction industry when I produced a report for the Labour Government on fatalities in that industry; I have taken an active interest in the scourge of short lets in London and the work of trading standards officers; and I live, like millions of others, in an area that is rife with fly-tipping and air pollution, so I hope that I can be allowed an element of indignation that this Government claim to have a balanced approach to regulation. They have created a wasteland where lack of public funding means that even existing protections are not pursued.
The Government charged for employment tribunals, which led to a 79% drop in overall claims, and they are now having to pay back the money. This will be no compensation to those who could not afford to pursue their case. Citizens Advice says that seven in 10 potentially successful cases were not pursued by employees—mainly women and the low-paid. Since April 2016, tribunal enforcement officers have been able to impose financial penalties on defaulting employers in the minority of cases where the applicant won their case but the employer did not pay up. BEIS confirmed that there had been 60 penalty notices as a result of 164 warning notices for failing to comply with employment tribunal orders. In the period of April 2016 to February 2017 the total paid out by employers on these fines was £83,000—not each; that is the total—yet the myth of large payouts is still perpetrated by the press.
The Government reduced protections for workers in small business by amending the Health and Safety at Work Act. Trading Standards has lost 60% of its staff, meaning that tracking down faulty or fake goods is more difficult. That means that bad companies can get away with faults in their products with virtual immunity, while good companies are undercut by fake goods when what they want is a level playing field.
The Government deregulated lettings, and the impact in London on short lets is changing the nature of settled residential blocks, to the detriment of existing residents. The Government maintain that they are supporting a sustainable environment, yet new homes no longer have to be carbon-rated.
Last month, as my noble friends Lady Andrews and Lord Whitty have already said, the Government agreed to introduce with immediate effect a de minimis threshold for the independent scrutiny of regulatory impact assessments. Departments will no longer have to submit an RIA to the independent Regulatory Policy Committee for regulatory provisions where the direct business impact of the measure is less than £5 million per annum. Anything under that threshold will be handled by the departments—which, it is said, should be more proportionate to the scale of the regulation’s impact.
As has been said, the Regulatory Policy Committee is an advisory, non-departmental public body with eight independent committee members from business, civil society—in this context, the TUC—the legal profession, academia and two professional economists. The committee verifies the impact of all regulatory proposals in relation to the business impact target, including non-qualifying proposals. It comments on the quality of evidence, not the policy itself.
The committee had already expressed concern at the continually varying standards of impact assessments and the general disregard for regulatory impacts on wider society. The latest change to a de minimis approach reduces the role of the Regulatory Policy Committee to a rump. I wonder whether this is a deliberate tactic to push the committee members into resignation mode. I am sure that the Minister is far too gentle a creature to collect scalps, but he has said that this more permissive regime will enable timely delivery of legislation, especially that related to EU exit. I find that very worrying. It looks like a clarion call to the buccaneers. What assurances can he give us that the Government will at least adhere to existing standards and that Parliament will still have the opportunity to scrutinise future regulatory changes in a meaningful way?
My report on the underlying causes of fatal accidents in construction nearly nine years ago recommended a regulation imposing a duty of care on persons carrying out work to do so safely. This regulation would have been be enforced by building control surveyors and officers. I said:
“This would extend their enforcement from the safety of what is built to include the safety of the building process”.
I made that recommendation in the context that many areas of construction—particularly, but not exclusively, the small building or refurbishment sector—were,
“out of sight below the Plimsoll line”.
Companies striving for excellence felt let down by those who did not pursue the same standards, and were crying out for a level playing field. I felt that more local oversight would be an important step towards improving safety standards in the hard-to-reach sector. The remit of building control would be extended to include health and safety requirements and integrate them into the building process. The role of the building control surveyor would be to check that the safeguards were included in the particulars of how a client intended to build—and, if they were not, to advise accordingly.
At the time, the Department for Communities and Local Government was consulting on the future of building control. I understood the emphasis at the time on sustainability, but I went on to say that,
“safer construction sites and safe maintenance of completed buildings is no less important and there is an opportunity here to make a step change in construction safety”.
I regret that my recommendation was not accepted and, while not claiming a direct link, the Lakanal House fire, which happened in the same year as my report and in which six people died, led to recommendations by the coroner which, nine years later, have still not been actioned. I watched the smoke from the building from my street, and it made a lasting impression on me. Let us hope that we are not still waiting on action from the Grenfell Tower tragedy in nine years’ time.
In preparation for my report, I spent a number of days with the Health and Safety Inspectorate. Its impact is disproportionate to its numbers. I accept that it is impossible to deal with health and safety simply by increasing the number of inspectors to thousands, but I never expected that the HSE would be cut to ribbons or that the number of inspectors and inspections would be cut. Of that the Government should be ashamed.
In conclusion, the Government have taken away the means for proper enforcement. They have pursued a policy of cost cutting rather than cost effectiveness, and the balance of their regulatory approach has led to a more unfair and a less safe society.
Baroness Deech (CB)
My Lords, I declare an interest as a regulator of long standing—a “quango queen”, if you like—having been involved with the Human Fertilisation and Embryology Authority, the BBC, the Office of the Independent Adjudicator for Higher Education and, most recently, as chair of the Bar Standards Board. I found them all worth while, because I had some familiarity with, respect for and interest in the organisations involved. The current belief is that only a lay person can be trusted to regulate a profession. I am not convinced; I have found that understanding and communicating with the profession are more important and that a professional person, such as a doctor or lawyer, is likely to be far more unforgiving and demand higher standards of their fellow professionals than a lay person, for they know how much is at stake for the reputation of their profession.
My conclusion is that the structure of governance, much discussed in relation to the BBC, for example, is less important than the quality of the persons set to regulate. Once you have too many strangers to the profession on the board, they take refuge in that meaningless jargon that gives the impression that they are doing something—drill down, low-hanging fruit, going forward, heads-up, pathway, challenging; noble Lords get the drift.
My other conclusion is that regulatory bodies, more specifically bodies that regulate regulatory bodies, have run wild. It is true that the Public Bodies Act 2011 set in train a movement to abolish some bodies and merge others, with some success, and that leaving the EU will save us £471 million in annual budgetary contributions to 21 EU agencies that will be completely redundant for UK purposes, according to a recent report by Fieldfisher. But the Government seem intent to row back on some of the good work by continuing to establish more bodies. We read a great deal about the failures of the relevant regulatory bodies in uncovering failing schools and hospitals; the most notable failure in recent years was the Financial Services Authority in relation to the financial crash of 2008. It is now reborn as two separate bodies, and there is a lesson to be learned there from the shortcomings of one overarching body, possibly too distant from the institutions it was to oversee.
My remarks will relate mostly to regulation of the legal profession, but one may generalise from that. In relation to the structure of regulation under the Legal Services Act 2007, there are too many bodies jostling to be master. The Legal Services Consumer Panel is now in competition with the Competition and Markets Authority, both investigating the market for legal services—although, as someone once said, why should there be only one competition authority? Not only that, but we are to have a new body, the Office for Professional Body Anti-Money Laundering Supervision, to oversee the adequacy of the anti-money laundering supervisory arrangements of the 22 professional body anti-money laundering supervisors listed in Schedule 1 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Costs will be covered by the many accountancy and legal bodies affected, adding, in the end, to the costs that have to be met by the client, in addition to the already considerable costs run up and passed on by more immediate legal regulation. Even so, the legal groups involved deny that there is any evidence pointing to legal-sector involvement in money laundering, and that this new exercise is therefore unnecessary.
Muscling into the field as well are the Regulatory Policy Committee, the Cabinet Reducing Regulation Sub-Committee, the Better Regulation Executive and the Regulatory Futures Review. This pointed out that the annual spend of the 45 regulatory bodies reviewed was £2.54 billion, of which half is grant funded. It could have looked at over 90 bodies, with a total expenditure of £4 billion, ranging from civil aviation to the Human Tissue Authority. Many were set up in response to disastrous events, such as sports-ground accidents. The review and the executive call for regulated self-assurance—as I said, trust the professionals to police themselves; the chairs of the front-line regulators should not be ruled out because they have legal qualifications. We need fewer business regulations and to reduce the costs, as they called for. The Legal Services Board, established under the 2007 Act, certainly goes far beyond that. It over-enforces and places burdens on lawyers which are passed on to their clients.
The Legal Services Board grew from an OFT report in 2000 about market competition and the Clementi report of 2004 on the regulatory framework of the legal services, which was regarded as self-serving and overcomplex. By the time the 2007 Act came into force, it was all already out of date because of the financial crash. The Clementi report highlighted consumerism, but recent events have taught us that the protection of innocent victims, the public interest and the highest ethical standards on the part of lawyers and bankers are more important than free market competition. Now we have legal services regulation—which is overregulation, duplication, interfering and sometimes without regard to the good practices of the professions—under the umbrella of the Legal Services Board.
Now that we are leaving the EU the legal profession is standing up to promote its past and future strengths and successes, with London as the choice of venue for litigation. That Brexit strategy needs a profession whose standards and integrity are beyond doubt and which is not seen as dominated by government. Yet, ever since the Legal Services Act, the perspective from the rest of Europe and North America has been that the legal profession suffers from government interference. I was shocked at a European conference when a delegate from an eastern European country only newly liberated from communism said to me that it was shameful that the British legal profession had come under government domination. There should be accountability only to Parliament, not to the Government, on the part of the Legal Services Board, and no government hand in appointments to the board.
The Legal Services Board presides over eight professional regulators with very different functions and characters. They apply to them the eight regulatory objectives in Section l of the Legal Services Act, which have no hierarchy. The Act is badly crafted, for there is no clear focus, and mission creep was bound to happen; one objective can be played off against another. Professional standards, although listed, seem to come low down. The fact that the Legal Services Board entertained the notion of abolishing the cab-rank rule and allowing referral fees went completely against the hallmark of the independent profession of the Bar, whose ethos underpins the rule of the law and citizens’ rights. Outcomes-focused regulation, as pushed, scarcely hits the mark. In its first programme of work in 2010, the Legal Services Board promised that, by 2013, legal services regulators in the UK would be seen as world leaders—the opposite, sadly, is true, as I have shown.
Reform is urgently needed, even though the Ministry of Justice reviews have shied away from legislative change. Indeed, at one stage, the Legal Services Board itself stated that its goal was to make its own existence unnecessary. But rare is the quango that self-destructs. The legal regulators’ own working party recommended one single regulator for the entire legal profession, which would make an oversight regulator redundant. It recommended the complete separation of the representative bodies and the regulatory arms because the professions cannot be seen to police themselves. This is a good principle. The Advertising Standards Authority is sadly an exception, in that it is a self-regulating body funded by the advertisers. Will the Minister start reform of this body?
The unregulated sector in law has a problem. There is an unregulated sector versus a reserved activities focus and it is both confusing and possibly harmful for the public. At the same time, it may pose overly onerous regulation on those who in fact need it least. There is no logic to which legal activities are regulated and which are not. I hope that the Minister will tell us that this needs review, too.
The Ipsos MORI veracity index shows a steady climb in the number who trust lawyers—up to 54%—while politicians remain steadily at the bottom. When I was a regulator, I said that I was more regulated against than regulating. This has to stop, and legal regulation is more than ripe for total overhaul.
Lord Haskel (Lab)
When President Jack Kennedy said that you do politics with the people not to the people, I always thought that what he had in mind was regulation. I agree with the noble Baroness, Lady Neville-Rolfe, when she said that regulation has to be well thought through, well explained and balanced and has to do the job. I add that neither should regulations be an excuse for skeleton Bills or for getting primary legislation through by stealth and hoping that nobody will notice.
After David Cameron’s Government promised an outright ban on fracking in national parks, many considered that they reversed that promise by smuggling a statutory instrument through Parliament. It is regulation that maintains the public good, sets standards, deals with market failure and encourages good business behaviour, and it is often executed through secondary legislation because it is quick. It is the bureaucracy, the cost and working with regulations that are the source of constant dispute and debate between business and the Government, as many noble Lords have explained.
The noble Lord, Lord Stoneham, gave examples from his experience. I suppose that I ought to own up that I benefited from regulation. My company made technical textiles; we developed fabrics that satisfied the very stringent safety standards required in civil aircraft, hotels and public places. Satisfying these regulations helped us to become a supplier to major aircraft manufacturers and hotel chains. Building such a niche is an important element in growing a business—and, yes, I benefited.
Frequently, in an effort to reduce regulation, there is a policy of one in and two or even three out—three out is probably a step too far, as the noble Lord, Lord Curry, said. Many of us feel that this numbers game and the constant pressure to reduce regulation has led to a reduction in standards. As the excellent Library brief said, the Grenfell Tower tragedy is probably an example of this. As a result, regulation is coming under much more scrutiny. Over the years, there have been efforts to minimise regulation, reduce the cost and quantify its effect but, on virtually every occasion, exclusions and the ill-defined scope and poor research have thrown doubt on the numbers. Noble Lords will remember the Red Tape Challenge and the Better Regulation Task Force. All these efforts eventually became discredited—the national minimum wage, for example, was excluded from a business impact target. We certainly need to improve the system, as my noble friend Lady Andrews said.
This is why the success or failure of regulation very much depends on parliamentary scrutiny. Central to this work is your Lordships’ Secondary Legislation Scrutiny Committee and Delegated Powers Committee. I declare an interest as a member of the Secondary Legislation Scrutiny Committee. We expect a government department to offer well-considered and easily understandable explanations to justify any statutory instrument and its likely impact, whether economic, social or environmental. The public should have an opportunity to respond. This is why your Lordships’ committee has maintained pressure on the Government to do exactly that.
The noble Baroness, Lady Neville-Rolfe, called for a champion. It was partly as a result of the pressure of this House that each department now has a Minister with special responsibility for secondary legislation, with a senior responsible owner—a senior civil servant—accountable for both process and quality. The Parliamentary Business and Legislation Committee in the Cabinet Office now overviews all secondary legislation across government. Only last month, we were told that Stephen Barclay MP is now acting as the secondary legislation champion at the Treasury, and we were given assurances that there is now a focus on better management within all departments.
I agree with the noble Baroness, Lady Altmann, that the Government’s administrative convenience must not take priority over the interests of the potential respondents to regulation, because poorly prepared regulation can hold back growth and productivity. Perhaps the record occurred in February 2013, when the Department of Health laid regulations to govern the use of tendering in the procurement of NHS services. Your Lordships’ committee received 2,000 submissions, most of which indicated a belief that the regulations did not match up to ministerial undertakings. Quite rightly, the committee reported the SI on the grounds that it might imperfectly achieve its policy objective and, of course, it was eventually changed.
Other noble Lords have spoken about the European Union (Withdrawal) Bill, and the problems which arise from incorporating EU regulations into UK law. Clause 7 of that Bill allows Ministers to use secondary legislation to help achieve this. The number of secondary instruments to be scrutinised will easily double or possibly treble. Last year, your Lordships’ Secondary Legislation Scrutiny Committee scrutinised 1,200 SIs. In addition, there will be new regulations for trading with the rest of the world when we are outside the EU. Indeed, ending the flood of regulations from Europe was central to the Brexit campaign. However, it looks as if we are going to have a lot more work as a result of that. Much of the domestication of the acquis will be done through statutory instruments. I repeat that the procedure of explanatory memorandum impact assessments and costs will have to be carefully worked out on each one so that Parliament and the public can judge whether the resulting SI is equivalent to the effect of the EU derived legislation or has to be changed. I add that your Lordships’ committee would not be able to carry out this work effectively without the support of its experienced and hard-working staff.
Several noble Lords have referred to the current concern of the Secondary Legislation Scrutiny Committee—namely, that two weeks ago, the Minister wrote to the Public Accounts Committee in another place, saying that where the impact is less than £5 million his department’s analysis will be more proportionate. Presumably he is trying to reduce the government workload. I will not repeat the questions put by the noble Baroness, Lady Andrews and others, but quite rightly the committee has written to the Minister, saying that, irrespective of this threshold, standards have to be maintained. They have to be maintained because this is our major check on the Government. I hope that the Government will give us an assurance that these standards will be maintained; otherwise, the Government—any Government—can look forward to more pressure from your Lordships, because regulation has to be done with the people, not to the people.
Baroness Henig (Lab)
My Lords, I am honoured to be listed twice in this debate. I feel a bit like New York—so good they named it twice. I first draw attention to my interests as listed in the Lords register, and to the fact that for six years, from 2007 to 2013, I was the chair of the regulatory body for private security.
I commend the noble Baroness, Lady Neville-Rolfe, for introducing this important debate. I hope that she is not regretting it in any way. I strongly agree with her that proportionate regulation is very important—proportionate, that is, to the risk involved; a point made, I think, by the noble Lord, Whitty, with which I strongly agree.
I make the point about regulation being proportionate to risk because I want to speak about regulation in the private security industry, where two factors have dramatically increased the level of potential risk to the public. The first is the change in the number of private security guards, as against police officers, patrolling public space and buildings. As the numbers of police officers have consistently fallen since 2010, the numbers of security guards on the front line have risen, and they far outnumber the police as the front line of defence in our main shopping areas, streets and crowded places.
The second factor, which I need hardly emphasise, is the escalating threat of terrorist activity—to a level which is critically high in terms of risk to the public. The question arises therefore: is the basic regulation introduced to govern private security in 2003 still appropriate, effective and proportionate to the risks now entailed in 2017? The answer to that question has to be no, so what is being done about it?
It is incredible to recall that, as recently as 2010, the then Government declared their intention to abolish the Security Industry Authority—the regulatory body—and deregulate the private security industry. As a result, there was a huge outcry from the major industry bodies themselves and the businesses and their representatives, who told the Government how effective seven years of regulation had already been in raising standards and driving criminals from the sector. Commendably, they succeeded in getting the Government to change their mind. However, they also argued that regulation in the sector needed to develop, that as well as requiring individuals working in the industry to be licensed, businesses needed to be regulated and that we needed to stop unscrupulous operators lowering standards and undercutting quality operators. They argued that the four days of basic training needed to be revisited and that the stringent requirements for companies in the approved contractor scheme should be extended to all businesses.
Importantly, this was businesses not complaining about red tape but taking the lead in being forward-looking and calling for appropriate changes in regulation. The Home Office agreed with them, and the Minister for home affairs in the House of Lords—now a very senior Member of this House—told us in 2011 in this House, and told the industry, that the changes it was calling for would definitely be brought in before the end of the last Parliament. He said that business licensing would definitely happen. However, nothing happened. After this morning’s debate, I cannot help wondering whether the noble Lord, Lord Curry, and the Better Regulation Executive had anything to do with that.
At the same time, the Leveson inquiry revealed another major weakness in the sector—the unscrupulous and often criminal activity of some private investigators. Regulation of that sector was included in the Private Security Industry Act 2001, but was postponed by the Government in 2010. After Leveson, the then Home Secretary—now the Prime Minister—promised that such regulation, which was strongly backed by the bodies representing private investigators, would be introduced as soon as possible and certainly by the end of the Parliament. Again, nothing happened.
When I raised both of these issues in this House in 2015, I was assured by the noble Lord, Lord Bates, that they would be a high priority for the new Government. Of course, they were not: that was just more false promises. Clearly we have a situation where regulation deemed essential by one government department—in this case, the Home Office—can be blocked by another, even in the face of escalating security threats and rising terrorist activity.
In 2016, a triennial review of the Security Industry Authority was completed; the report and recommendations were handed over to the Home Office. Nearly a year and a half later, we have heard nothing about this, despite Written Questions to the Home Office asking what has happened. I wonder whether the delay and the disappearance of the report have anything to do with my understanding that the independent reviewer has recommended both the licensing of private security businesses and the regulation of private investigators.
Given the risks and threats that we all now face, this is just not good enough. The security guards on the front line against terror have had basic training, and they will do their best: we have seen that in many brave actions this year. However, counterterrorism training, for example, though available, is voluntary. It is not yet an integral part of the four days of basic training that security guards receive. It should be: the Minister in charge of counterterrorism in the Home Office wants it to be. What has to happen to turn intentions such as this into action?
For some years now, the Scottish Government have insisted that security contracts in the Scottish public sector are awarded only to approved contractors, which is to say those who operate to the highest standards. That is surely appropriate to protect the public. The Government in England and Wales, not surprisingly, have not followed suit, so I am truly grateful to the noble Baroness opposite for raising the whole issue of regulation. I suggest to her that she deploy her considerable talents to persuading government colleagues in the trade department and the Cabinet Office that proportionate and effective regulation matters, that it should be taken seriously and that, without it, public safety is being endangered every day.
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?
Lord Mendelsohn (Lab)
My Lords, I will make a declaration of interest. I am indeed meant to be a beneficiary of successful deregulation over the last few years, when we have had successive figures about how much has been deregulated to the benefit of businesses. I calculate that on that basis, I should be some £200,000 better off. I am not, but I am meant to be a beneficiary of successful deregulation. I have experience of regulation because I am now a PEP and treated as one with every bank account I have to deal with. However, I benefit from regulation, because I am regulated in one of my businesses by the FCA. While people may whinge about it, it provides an important architecture for businesses and our business benefits from it.
I congratulate the noble Baroness, Lady Neville-Rolfe, who has been a great champion of these issues and has a tremendous track record. I agree with much of what she said, and her prescriptions are similar to the things I will say; in fact, I may have been influenced by her in the first place. However, I disagree with her on one point. She argued that productivity is being held back by a surfeit of poorly enforced regulation and other forms of regulation. I do not believe this to be the case. The noble Lord, Lord Stoneham, made the point in his excellent speech that the OECD classifies us as one of the low-regulation countries and that low regulation is frequently cited as one of the reasons why we have high levels of foreign direct investment—whatever the arguments about that are. There is no evidence that there is an impairment of productivity caused by regulation. In fact, the opposite is more readily identifiable from the evidence. More regulated countries, including the US and other parts of Europe, are able to exercise greater levels of productivity by sometimes better use of management, skill and innovation and use of capital features. So that is not an argument. Some of this is not about the economic issues, although they are important.
It is worth acknowledging that we have had some excellent contributions. We miss certain voices, which have been prominent in this debate, such as that of the noble Earl, Lord Lindsay, but some interesting points have also been made about different industries. The noble Baroness, Lady Deech, talked about legal services. I suspect that the rise in trust in the law may well be as a result of the regulator she complains about. However, it is certainly encouraging that the level of trust in such an important sector as legal services is increasing.
My noble friend Lady Donaghy made an interesting speech about the construction industry, and my noble friend Lady Henig made an important contribution about one of the most successful models of regulation in this country: the security industry. I have direct experience of a company which, when the regulations came in, did not believe that they would be taken seriously, and went to the wall as a result. That was a jolly good thing. The SIA has done a wonderful job. I regret that the Government have not been more forthcoming on points which are clear about how that industry has developed a regulatory structure of great strength as a result. I know of many cases that support that. There are stories about companies, even brand names such as Kroll, and some of its alleged conduct. Especially in this modern digital world, it should come under a proper form of regulation.
The economic case for ensuring that we get regulation right is not as strong as the other case based on safety risk and other sorts of market failures. That is not to say that it is not important, but when the Federation of Small Businesses tells us that 20% of small businesses said that regulation was one of their top issues, that means that 80% said that it was not. We understand the relative importance of this. When businesses say that tax administration rates and other sorts of issues are more important, it indicates the level of priority.
The fact that we can do something is a case for doing it, but we need to put the importance of regulation in its context. Where it is most required is to deal with issues such as defining standards, competitive dynamics, failures, risk, imbalances, and those sorts of things—many of which my noble friend Lord Whitty talked about. We have to consider that regulation has to have a clear purpose and be easy to understand; there should be much more obligation on regulators to make sure that their regulations are understood.
We have touched on some key issues. The architecture of how we make sure we get good regulation is really important. I share the deep concern of others who wonder how the Government’s interpretation of how they should respond to the Public Accounts Committee’s exhortation to improve and streamline regulation, or even their understanding of their own manifesto to get better regulation, can in any way be helped by undermining the useful architecture that is evolving in our country. The idea that the Regulatory Policy Committee should change in the way that the Government suggest, whether over the de minimis issue, giving government departments the authority to be able to define, however they wish, to establish the level of impacts or the assessments, or the controversial requirements such as the first-stage consultations, are problems, and I urge the Government to think again about how they look at the Regulatory Policy Committee. There is consensus on that. I agree with the noble Lord, Lord Curry, that it is time to strengthen, not weaken, the structures we have, and the noble Baroness, Lady Altmann, also made an excellent case. We need not just to ensure that we do not give departments absolute and unfettered ability to define this process but we should look at putting it on a more independent and possibly statutory footing. The definitive case was made unbelievably well by my noble friend Lady Andrews, and I urge the Minister to prioritise her questions when he answers. My noble friend Lord Haskel properly identified the statutory instruments, which are becoming an ever increasing problem in this House; they are being used in particular for departmental convenience and not for the public interest.
What is to be done? Of course, we have to beef up the independent structures, as endorsed by the National Audit Office, and we need to include EU tax administration, the national living wage and the national minimum wage. We have to be truthful about the impacts. It is essential that we get a handle on what is happening, particularly as we go through Brexit. It is crucial to think small first and be easily understood, along the lines of what the noble Baroness, Lady Neville-Rolfe, said. It is also utterly crucial that we enforce the regulations that we have. I declare my interest as a landlord. The number of landlords who are prosecuted as against the number of complaints that are made shows that we probably do not enforce the regulations properly. The Residential Landlords Association found in 2016-17 that only 496 landlords were prosecuted but there were 105,359 complaints. I would be interested in knowing how we can process these complaints effectively.
I turn to the subject of the national minimum wage and the categories of workers. Each year 70,000 internships are unpaid, all breaching the national minimum wage rules, yet alongside the entirety of the issues surrounding the national minimum wage, there have been only 13 prosecutions. I worry about this because Grenfell raises a number of particularly tragic issues. As a result of Grenfell, we decided to look at fire safety in relation to the short-term renting of private homes, such as those offered through Airbnb. It seems that the Government believed that the fire safety order of 2005 covered this. The problem was that none of the agencies—the Government, the local authorities, the fire brigade or the fire safety authorities—thought that they had responsibility for it, so no one was doing anything. Counsel to the Health and Safety Executive then provided us with an opinion saying that the safety order—the law that the Government think applies—does not apply. There is a regulatory break, so there is no regulation whatever. This is a major issue and I would like the Government to clarify the position. There is also the major question of who enforces the enforcers. We have a big problem with the gap there and I would like to see the Government try to address it.
Questions were raised about the European Union. We have to get some understanding of how the changes will affect us. There is a variety of EU regulations and I would be interested in knowing which UK bodies will assume the investigatory role of the European Commission. What work have the Government done on that? How many bodies do they estimate will need to transition?
Finally—I make this point now, as I do in all my contributions—I would be very grateful if the Minister could give one clear answer or proper guidance on how we should measure the Government’s achievements on better regulation. It is very important that this is not just about exhortation; anything that we can use to test what better regulation means would be very welcome.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, I join the noble Lord, Lord Mendelsohn, and other noble Lords in offering my congratulations to my noble friend on securing this debate. As others have made clear, she brings much experience to this field, having served as a civil servant on the better regulation unit with our noble friend Lord Heseltine, in the private sector and as a Minister. I welcome this opportunity to discuss a topic that continues to be a high priority for the Government. It is one in which my noble friend has a long interest.
I am new to this subject but I am grateful for the accreditation that I got from the noble Baroness, Lady Donaghy, who described me as “a gentle soul”—at least I think those were the words she used. She tells me she said “a gentle creature; “soul” is probably too generous a word. As a gentle creature, I hope that I can at least bring the appropriate steel to these matters where necessary. I stress that I am new to the better regulation portfolio. I have yet to meet Anthony Browne, the incoming chair of the Regulatory Policy Committee, but I hope to do so shortly—possibly next week, depending on his and my diary commitments. However, I certainly pay tribute to the outgoing chair, Michael Gibbons, who has done an excellent job for the committee since its inception in 2009. He has completed two stints, serving for eight years, and I and the rest of the Government pay tribute to him for that.
I also completely understand that regulatory reform has become a much more sensitive and emotive issue in the light of the Grenfell tragedy. In due course we will certainly want to reflect on the current inquiries, but at this stage I do not want to say anything that might pre-empt or second-guess what might come out of them. We obviously await the outcome with concern and interest, but at this stage the Government are looking anew at regulation and considering in this Parliament what the better regulation framework should look like.
I also make it clear that our regulatory reform agenda does not come at the cost of people’s safety, and nor would it ever do so. Our aim is to deliver smart, proportionate and balanced regulation, while ensuring that essential protections are retained. The noble Lord, Lord Whitty, preferred the word “proportionate”; my noble friend used the word “balanced”. I agree that words are important but I believe that both “balanced” and “proportionate” can be used. It is important to make it clear that we want to have the appropriate regulation while ensuring, as I said, that essential protections are retained. Regulation should also be proportionate to achieve the outcome required and at an appropriate cost to the business that bears it; this provides an environment that supports the generation of growth, competitiveness and jobs, as my noble friend alluded to.
It is also appropriate that we make it clear that we will decide in due course, in this Parliament, how the better regulation system will operate. The noble Lord, Lord Haskel, referred to the work of the Secondary Legislation Scrutiny Committee, an important committee that does very useful work in this field. My first experience of any committee was the Joint Committee on Statutory Instruments. I think the noble Lord has also served on it and, as he will remember, it had no role in looking at the merits of secondary legislation; it could look only at its vires and so on. In that sense, it sometimes felt like an outer Siberia of committees. The Secondary Legislation Scrutiny Committee has a more effective role in this area. We would certainly want to make sure that not just that committee, but Parliament as a whole, has a proper role to play. However, I think the Government can provide the appropriate assurance that this will not be achieved through reducing necessary public protection.
As we consider how the better regulation system will operate, we will continue to discuss these matters. We have discussed them before and will continue to do so with others in due course. I give an assurance to the noble Baroness, Lady Andrews, that we have discussed such changes with various business groups, despite what she said. Officials have met the key business groups over the last two months. Only last week I attended a meeting with the FSB, the CBI, the EEF and the IoD, and I understand that the de minimis rule was mentioned following recent conversations. I seek to reassure business that any changes that we allow will also allow closer scrutiny of the most important measures.
Baroness Andrews
The Minister has answered my question in part, but does that mean he will reconsider establishing a call-in process? Business is most concerned that these measures will fall under the barrier of £5 million and will not be looked at.
Lord Henley
Final decisions have not been made; the noble Baroness will have to be patient in these matters. She referred to a letter from me to colleagues in government, but obviously we will not comment on leaked documents.
Baroness Andrews
My Lords, the letter came to me in good faith by mistake. It was not a leaked document.
Lord Henley
I do not know how the noble Baroness received it, but she will be aware that it was an internal letter from me to colleagues within government. As far as I am concerned, that amounts to a leaked document.
Lord Haskel
I can shed a little light on the subject. The letter was from the Minister to the Public Accounts Committee in another place.
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.
Lord Mendelsohn
Will the Minister clarify the changes to the RPC that are in effect? Is he suggesting that the change to the regime is more permissive, less permissive or exactly the same as what stood before? To be clear on the purpose, is he saying that the changes were directly as a result of those suggestions from other committees? Were some of the changes requested by departments to have freedom and flexibility, or were they in any way related to the pressures in the system as a result of the EU exit?
Lord Henley
My Lords, I do not accept that the EU exit has led to those changes. I said that the Public Accounts Committee had made some recommendations. We considered those and brought in the de minimis rule. We are not bound to keep that. We could change it if necessary, but it gives the RPC a freer hand in what it does and allows it to focus its efforts more appropriately on the job that it does very well.
I can also give an assurance, since there was some criticism of our attitude to the RPC, that we are still committed to it and its work. We are making sure that it has the appropriate number of members. It currently has eight members and it will continue to have eight members. Announcements will be made in due course as to whether some members have been reappointed, or where necessary new members will be brought in, so that it can continue to do its work.
I am beginning to run out of time and I do not want to deprive my noble friend of the chance to say a few words at the end of the debate. However, I should like to deal with one or two of the other questions that have been raised.
I think I have more or less touched on it, but the noble Lord, Lord Haskel, referred to the letter from my noble friend Lord Trefgarne, the chair of his committee, about the threshold. We acknowledge the good work of the committee and I am aware of the letter from my noble friend. I think that it was received in the department on 28 November and I intend to respond to it shortly. I can reassure the noble Lord that the department will continue to provide appropriate analysis of its policies to the committee.
Perhaps I may also give an assurance to my noble friend Lord Altmann on pensions auto-enrolment. As a former member of the Department for Work and Pensions, where I have also served, she will know that auto-enrolment has been a great success. Some 8 million people have now enrolled and the Government are conducting a review to build on this success and make sure that the programme works in the long term. The review will be led by the Department for Work and Pensions supported by an external advisory body. I am told that it will report by the end of 2017, so my noble friend does not have to wait for long because that really does mean pretty soon.
Concern was expressed by my noble friend Lady Neville-Rolfe and the noble Baroness, Lady Andrews, about the RPC’s processing not applying to tax or the national minimum wage. I can give them an assurance that HMRC has a separate body, known as the Administrative Burdens Advisory Body, to consider reducing the burden of tax administration, so there is a role for it which provides scrutiny.
Lastly, the noble Lord, Lord Stoneham, was concerned about what plans we have for EU exit. This is a concern that comes up in every Question and debate in the House. We have made it quite clear that the withdrawal Bill will be designed to ensure that EU exit will take place with certainty and that we maintain continuity and control. The Bill will help to maximise certainty for business on what regulation will apply on exit and to maintain important protections for consumers.
As always, I apologise for the fact that I have not been able to address every point that has been put before me, but again as always I promise to write to noble Lords on any issues that I have not addressed. I end by thanking my noble friend once more for introducing this debate.
Baroness Neville-Rolfe
My Lords, I am delighted to have led such a constructive and interesting debate with a lot of fine examples. In response to the noble Baroness, Lady Henig, I have no regrets at all about tackling this subject.
Indeed, there has been some important common ground on this often disputed subject: for example, on simplification; on the battle against complexity; on a risk-based approach, which we probably should say should be proportionate and balanced; on enforcement of the law—to my mind, investing in enforcement is a good investment—and on thinking small first. It is not a sexy area, in the words of the noble Lord, Lord Stunell, but it is an important one, especially in the Brexit context. I was very glad to hear from my noble friend the Minister of the progress made, not least on culture, and I look forward to hearing from him in due course on the vexed issue of tumble-driers.
Many noble Lords referred to the plans to reduce the powers and reach of the Regulatory Policy Committee. This, it seems, is still a rumour, but it is a profound disappointment to me because it is not a step in the right direction. Many others have said this, including my noble friend Lady Altmann and the noble Lords, Lord Curry, Lord Haskel and Lord Mendelsohn. However, I think that we should be generous to the Government. It may be that, in the light of this debate, they will think about what can be done at this moment of Brexit to keep the flow of unnecessary regulation in check and ensure not only that necessary safety standards but also economic impacts are taken into account in the decisions we make in the interests of prosperity and productivity.
It was a pleasure to hear from the noble Lord, Lord Stoneham, and the noble Lord, Lord Whitty. I think that he is quite wrong. My fear is—and this is one of the reasons I voted to remain—that without a detailed debate in Brussels, we will actually regulate more heavily.
I have run out of time, but I would like to thank all noble Lords who have taken part in the debate. Let us hope that our efforts today will move the dial.