Legislative and Regulatory Reform (Regulatory Functions) (Amendment) Order 2009

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, it 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.