That the Grand Committee do report to the House that is has considered the Legislative and Regulatory Reform (Regulatory Functions) (Amendment) Order 2009.

Relevant Document: 22nd Report from the Joint Committee on Statutory Instruments.

My Lords, the Government laid the Legislative and Regulatory Reform (Regulatory Functions) (Amendment) Order 2009 before Parliament on 20 July. The order amends the Legislative and Regulatory Reform (Regulatory Functions) Order 2007, which Parliament approved in November 2007 and which came into force on 6 April 2008.

The order forms an important part of the Government’s programme of regulatory reform. Since 2005, the Government have worked to improve the way in which we regulate and enforce regulations in this country. The aim is to increase the benefits that regulations can bring—and these are many—without, I stress, imposing needless costs and complexity on businesses. In particular, the Government have embarked on a radical overhaul of administrative burdens faced by business. For example, we are on track to deliver a savings to business of £3.4 billion under the current programme to cut administrative burdens by 25 per cent by May 2010. The Government have recently set a new target to cut the ongoing costs of regulation by a further £6.5 billion by 2015, bringing the total savings to UK business to around £10 billion by 2015. The Government are also determined to drive better regulation at the EU level and to deliver a risk-based and proportionate approach to regulatory supervision and enforcement across the entire regulatory landscape. It is this last aspect of the reform—proportionate and risk-based enforcement of regulations—that the instrument before us today primarily addresses.

The order seeks to ensure that regulators apply a risk-based approach to regulation. This will enable them to direct resources, which are inevitably limited, to the areas of greatest need, while minimising burdens on businesses that pose lower risks and have good records of compliance. The policy agenda flows from the recommendations in the Philip Hampton report, Reducing Administrative Burdens: Effective Inspection and Enforcement, and the report of the Better Regulation Task Force, Less is More: Reducing Burdens, Improving Outcomes, both published in 2005.

The Hampton review recommended new approaches, known as the Hampton principles, to regulatory supervision and enforcement, while the Better Regulation Task Force developed the five principles of good regulation. These principles are that regulatory activities should be carried out in a way that is transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed. The Government accepted these recommendations and introduced the Legislative and Regulatory Reform Act 2006 to implement them. Part 2 of the Act gives effect to this. Specifically, Section 21 of the Act enshrines the five principles of good regulation into UK law, while Section 22 enables a Minister of the Crown to issue a code of practice, based on the Hampton principles.

The code of practice and the regulatory principles, however, apply only to regulatory functions listed in an order made by a Minister under Section 24 of the Act. Any person whose function is listed in the order, known as the listing order, must have regard to the code and principles in exercising the function. Both the draft code of practice, now known as the Regulators’ Compliance Code, and the original listing order were laid before Parliament in 2007. The debates were very positive and supportive. When the instruments were debated in Grand Committee in November 2007, your Lordships welcomed their developments and particularly commended the code as a move in the right direction.

Both instruments came into force on 6 April 2008. Since then, 46 national regulators as well as all the local authorities in England have been under a statutory duty to have regard to the code and the five principles of good regulation when they carry out specified functions. Since the code came into force, some progress has been made by regulators to embed the code’s standards into their regulatory culture and processes. Many have reviewed, or are reviewing, their existing policies to meet the requirements of the code. For example, the Health and Safety Executive has published the changes that it has made, and plans to make, to comply with the code’s obligations. The Environment Agency has taken similar steps, and many local authority regulatory services appear to have aligned their enforcement policies with the provisions of the code.

The introduction of the code and principles is bringing about some culture change among regulators. Business, too, is beginning to feel the positive impact of the better regulation agenda and continues to support the code. Our discussions with some of our international partners have also shown the extent to which our work in this area is setting an international lead. It is because of the significant benefits that the code and the principles can deliver for regulators and those that they regulate that the Government have decided, through the order before us today, to extend their coverage to more national and local regulators.

In particular, the order seeks to extend the code and principles to three new areas. First, there are the local authorities in Scotland, Northern Ireland and Wales, where they perform reserved regulatory functions. Unlike English local authorities, these are currently excluded from the application of the code and principles. Secondly, there are public sector regulators, such as Ofsted and the Care Quality Commission, where they regulate business and third sector organisations. Thirdly, there are other relevant areas of national regulation, such as the money-laundering regulations, where the burdens imposed on business and the third sector can be significant.

Extending the code and principles to these new areas will ensure that the overwhelming majority of businesses and third sector organisations in the UK are regulated within the consistent and transparent statutory framework that the code and principles provide. This will ensure regulatory consistency and create a level playing field for most businesses across the UK. I stress that the order is a vital part of the Government’s effort to reduce unnecessary burdens on UK businesses and create a more efficient and competitive economy. It is important—even more so in the current economic situation—that we reduce any regulatory obstacle to business competitiveness.

Of course, its also important to stress that better regulation is not about removing necessary protections; rather, it is about making regulation as simple as possible for everyone—consumers, workers and business, as well the economy and society as a whole. The aim is to get the best outcome in the most efficient way, not to water down those outcomes. The order seeks to support regulators in a manner that ensures the optimal outcomes.

Finally, I emphasise the extent and depth of consultation with interested parties on the draft instrument. For over 13 weeks, officials actively consulted different stakeholders to seek their views on the draft order. Where necessary, officials met further with key stakeholders to discuss any concerns about the order. I am confident that the instrument enjoys the support of most key stakeholders. I beg to move.

My Lords, I thank the Minister for explaining the order. Reducing unnecessary regulatory burdens on both the public and private sectors is a worthwhile aim, strongly supported on this side of the House. To that extent, the order is welcome. However, in the Making It Simple annual review 2008, the noble Lord, Lord Carter, stated that the Government were on target to reduce the overall burden of regulation by 25 per cent. The Minister himself just referred to this. How does he square that figure with the most recent burdens barometer produced by the British Chambers of Commerce, which found that the total cost of regulation to business since 1998 had risen to £76.8 billion? Indeed, this is an increase of £10.8 billion from last year.

The Better Regulation Task Force established five principles of good regulation, to which the Minister referred. Those principles were designed to be a useful toolkit for assessing and improving the quality of regulation. The principles, as the noble Lord said, are proportionality, accountability, consistency, transparency and targeting.

I make the following observation about the order, because it is drafted—as many orders are—simply as a series of amendments to extant legislation and, when read on its own, is completely incomprehensible. The first things that it comes to—after the wherefores and whereases—are amendments to the 2007 order, but you need to get hold of the 2007 order to know what it is all about. Even then, the lay man would be hard pushed to make head or tail of it. Does that not breach the transparency test? The Explanatory Memorandum is indeed helpful, but that is not quite the same thing. I ask the Minister how those who are in business, who are often untrained and inexperienced in reading and interpreting orders and legislation generally, would know whether it applied to them and in what way.

Turning briefly to the impact assessment, can the Minister tell me whether the figure of £2.8 million for one-off costs is per regulator or across the whole country? As to the range of total benefits, which is stated as being from £2 million to £45.2 million, I observe that under any interpretation of the word “materiality” this is sufficiently wide to cause some scepticism. What does it mean and why is it so wide?

Returning to the order, I note that it is stated that the traffic commissioners have been assured that the code and principles do not apply to their functions of conducting civil or criminal proceedings. It would be helpful to have on the record the reason for this exclusion.

My Lords, I, too, thank the Minister for introducing this measure. Indeed, as has already been said, we cannot but approve of the aim to reduce the burden of regulation and bureaucracy on all people and businesses, particularly small businesses. However, one aspect that concerns these Benches is the difficulty of getting clarity as to exactly what is being proposed today in order that we may discuss it. That in itself is an area of concern.

Can the Minister give an assurance that, in order to achieve the aims set out, the order does not place too many burdens on small businesses? Trying to ensure that regulation is carried out in a proportionate and transparent way could have the reverse effect if small businesses, in particular, find difficulty in coming to terms with what they are being asked to do.

I believe that I am correct in saying that a review is proposed in 2011. How do the Government intend to carry out this review process? The Minister said that a great deal of consultation took place before the order was introduced but, in order to assess the results such a short time after its introduction, many people will need to be consulted and asked for their views, particularly those with small businesses. I would be pleased to know exactly what effect the Minister feels this will have on small businesses. Will we hear back from them about how the better regulation system is operating?

My Lords, I am not sure that I have the answers to all the questions, but I shall address those to which I do have answers.

The noble Lord, Lord De Mauley, asked about the exclusion of the traffic commissioners’ judicial functions. The 2006 Act specifically excludes from the definition of regulatory function,

“any function of conducting criminal or civil proceedings”,

which means that, to the extent that quasi-judicial bodies are carrying out any function of conducting criminal or civil proceedings, such a function is excluded from the scope of the code. It is not the Government’s intention to go beyond the specific language used in the Act.

I am looking for inspiration from behind me for an explanation as to why, according to the British Chambers of Commerce, the regulatory burdens barometer is moving towards stormy rather than fair weather. The UK now has the best ranked business environment in Europe and the fifth best in the world, according to the World Bank’s “Ease of Doing Business” index, which analyses the regulatory environment of 183 countries. The Government have delivered more than £2 billion in annual net savings by cutting out-of-date and unnecessary paperwork for businesses. That is £5 million a day, every day. This is on track to meet the target of a 25 per cent cut and is expected to deliver £3.4 billion in savings.

As to the point about the British Chambers of Commerce, it is a question of the methodology that it uses. There is another phrase in my brief but I cannot decode it; I think that I have some cryptographers working behind me.

The noble Lord, Lord De Mauley, talked about the one-off costs per regulator. Those one-off costs are across the country, apparently, which I think answers another question.

A further point was made about the impact on SMEs. My understanding is that this will be beneficial regardless of the size of the business in reducing the regulatory burden. I can think of one area that I am sure impacts on most of us, which is to get it right when trying to open and close bank accounts and the amount of evidence that you are required to produce. There is certainly potential in that area. I hope that I am right in saying that the size of the business should not have anything to do with it. The aim and intention is at one with the Hampton review; the recommendations are exactly the same.

With regard to the point about the British Chambers of Commerce, although we agree with the methodology, we think that the figures that we have quoted about the savings are reliable, so we may have to agree to disagree on this. If I have not said it already, we have set a new and ambitious target to cut the ongoing costs of regulation by a further £6.5 billion over the next five years.

I thank noble Lords for their consideration of this draft instrument. I emphasise that its aim is to ensure that national and local regulators apply a risk-based and targeted approach to regulation so as to improve outcomes and minimise burdens on businesses. Many UK regulators are already working within the statutory framework provided by the Regulators’ Compliance Code and to the principles of good regulation. This instrument will ensure that more and more regulators operate within the same framework. This is important because business, especially small businesses, needs an environment where regulation is effective and bureaucracy is minimised. In the current economic climate, I am sure that noble Lords would agree that this is more important than ever. It is also important because we can protect the environment, reduce accidents, protect workers and thus maintain an efficient and competitive economy only if we have appropriate and good-quality regulation that is properly and fairly enforced.

This instrument will bring real benefits to many groups: to regulators, because they will be able to target their resources more effectively; to business, because the costs of regulation will fall; to society, because rogue operators will be more effectively targeted and tackled; and to the economy, because removing burdens on business will enable the UK to retain its competitive edge in the global economy. On that note, I ask the Committee to approve the Motion.