HOUSE OF LORDS
Delegated Powers and Regulatory Reform Committee
3rd Report of Session 2005–06
Review of the Regulatory Reform Act 2001
Commons Bill [HL]
Consumer Credit Bill
Regulation of Financial Services (Land Transactions) Bill
Merchant Shipping (Pollution) Bill [HL] – Government response
Children and Adoption Bill [HL] – Government response
Harbours Bill [HL]
Interception of Communications (Admissibility of Evidence) Bill [HL]
Racial and Religious Hatred Bill
Ordered to be printed 12 October and published 13 October 2005
London : The Stationery Office Limited £price
HL Paper 45 The Select Committee on Delegated Powers and Regulatory Reform The Delegated Powers and Regulatory Reform Committee is appointed by the House of Lords in each session with the orders of reference “to report whether the provisions of any bill inappropriately delegate legislative power, or whether they subject the exercise of legislative power to an inappropriate level of parliamentary scrutiny; to report on documents and draft orders laid before Parliament under the Regulatory Reform Act 2001; and to perform, in respect of such documents and orders and subordinate provisions orders laid under that Act, the functions performed in respect of other instruments by the Joint Committee on Statutory Instruments”.
Current Membership The Members of the Delegated Powers and Regulatory Reform Select Committee are: Lord Brooke of Sutton Mandeville Lord Dahrendorf (Chairman) Baroness Gardner of Parkes Lord Garden Lord Harrison Lord McIntosh of Haringey Baroness Scott of Needham Market Lord Shaw of Northstead Lord Temple-Morris
Publications The Committee’s reports are published by The Stationery Office by Order of the House. All publications of the Committee are on the internet at http://www.parliament.uk/parliamentary_committees/dprr.cfm
General Information General information about the House of Lords and its Committees, including guidance to witnesses, details of current inquiries and forthcoming meetings is on the internet at http://www.parliament.uk/about_lords/about_lords.cfm
Contacts for the Delegated Powers and Regulatory Reform Committee If you have any queries regarding the Committee and its work, please contact the Clerk to the Delegated Powers and Regulatory Reform Committee, Delegated Legislation Office, House of Lords, London, SW1A 0PW. The telephone number is 020 7219 3103/3233. The fax number is 020 7219 2571. The Committee’s email address is [email protected]
Historical Note In February 1992, the Select Committee on the Work of the House, under the chairmanship of Lord Jellicoe, noted that “in recent years there has been considerable disquiet over the problem of wide and sometimes ill-defined order-making powers which give Ministers unlimited discretion” (Session 1991–92, HL Paper 35–I, para 133). The Jellicoe Committee recommended the establishment of a delegated powers scrutiny committee in the House of Lords which would, it suggested, “be well suited to the revising function of the House”. As a result, the Select Committee on the Scrutiny of Delegated Powers was appointed in the following session, initially as an experiment for a limited period. It was established as a sessional committee from the beginning of Session 1994–95. Also in Session 1994–95, following the passage of the Deregulation and Contracting Out Act 1994, the Committee was given the additional role of scrutinising deregulation proposals under that Act. As a result, the name of the committee was changed to the Select Committee on Delegated Powers and Deregulation. In April 2001, the Regulatory Reform Act 2001 was passed which expanded the application of the deregulation order-making power under the 1994 Act, and the Committee took on the scrutiny of regulatory reform proposals under the Act. With the passage of the 2001 Act, the Committee’s name was further amended to its present form, the Select Committee on Delegated Powers and Regulatory Reform. Third Report
REVIEW OF THE REGULATORY REFORM ACT 2001 1. This Committee, as well as reporting to the House on the delegated powers in bills, also scrutinises regulatory reform orders. With these twin responsibilities, the Committee has played a substantial role in the development of regulatory reform legislation. In particular, in relation to the Regulatory Reform Act 2001, we responded to the Government’s initial consultation in 1998–99, conducted pre-legislative scrutiny on the draft bill in 1999–2000 and reported on the bill itself in 2000–01. 2. On 20 July last, the day before the House rose for the summer recess, the Chancellor of the Duchy of Lancaster (Rt Hon. John Hutton MP) published the Government’s review of the Regulatory Reform Act 2001 together with a consultation paper on proposals for a new Regulatory Reform Bill, announced in The Queen’s Speech on the opening of this Parliament: “legislation will be introduced to streamline regulatory structures and make it simpler to remove outdated or unnecessary legislation”. The Chancellor invited this Committee to respond to the consultation but set a closing date of 12 October, a period entirely coinciding with the summer recess. There is much in the Government’s proposals which we find interesting and important but we find it impractical to respond properly within the timescale. We also understand that a late submission would be unlikely to help inform the Government’s policy for the bill. We are disappointed in this approach to consultation, particularly on a subject where the Committee and members of the House have such a close and legitimate interest. 3. We will consider the bill itself when it comes before us in the usual manner, for the scrutiny of its delegated powers. At this stage, we wish to note that we will pay close attention to issues such as • the test of what subjects are appropriate for legislation by regulatory reform order (RRO), including the test of “large and controversial” subject matter1; • the purposes for which the RRO procedure may be used, including simplification and the appropriate mechanism to implement Law Commission recommendations; • the nature of the tests to be employed, including the merit of concepts such as “burden”; • the relationship between RROs and very recent or impending primary legislation; • the rule that RROs may not create new secondary legislative powers. We shall also pay the closest attention to provision for changes to the parliamentary procedure for such orders, whether within the bill or by practice.
1 18th Report (2004-05), para 53. 2 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
COMMONS BILL [HL]
Introduction 4. This bill makes new provision for the registration etc. of common land and town and village greens. Among the statutes which it replaces is the Commons Registration Act 1965.
The Delegated Powers 5. The delegated powers in the bill are explained in a memorandum to the Committee from the Department for Environment, Food and Rural Affairs (Defra), printed at Appendix 1 to this report. We wish to draw the attention of the House to the provisions of clauses 28, 32 and 41. We consider the other delegated powers to be appropriate and subject to appropriate levels of parliamentary scrutiny.
Commons associations 6. Clause 25 enables the Secretary of State or the National Assembly for Wales (“NAW”) to establish commons associations for areas of common land or town or village greens subject to rights of common. Orders by the Secretary of State are subject to negative procedure. There are consultation and other requirements at clause 26, explained in the memorandum from Defra. In particular, the Secretary of State/NAW cannot make the order unless satisfied that there is substantial support for it. 7. The details of the constitution of the association are left largely to regulations (subject to negative procedure if made by the Secretary of State) under clause 28. But the establishment order can override the general regulations under clause 28. 8. The functions conferred on the association by the establishment order relate to the management of agricultural activities. The association can, in particular, be empowered to make rules (analogous to byelaws), breach of which may, under clause 32(2), be made a criminal offence punishable by a fine (the maximum being set out in clause 32(3)). 9. These provisions, taken together, are notable in that the bill gives little indication of who will participate in, or control, the association. A commons association will have considerable powers over the land in respect of which it is established (including the power in effect to create criminal offences) and we consider that the main features of the constitution of such associations should appear on the face of the bill. In particular, the Government were able to indicate at second reading that “the associations will function through majority voting”2. We recommend that the significant common principles of the constitution and administration of associations should appear on the face of the bill. 10. If the bill were to be amended to meet our concern in paragraph 9, we are content that regulations by the Secretary of State setting out the standard provisions of the constitution for the associations be subject, as proposed, to negative procedure. If, however, the bill remains as it is, we consider
2 HL Deb, 20 July 2005, col 1489. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 3
that regulations made by the Secretary of State under clause 28 should be subject to the affirmative procedure. 11. By virtue of clause 32, a rule made by a commons association may specify that a person who contravenes it is guilty of a criminal offence. Defra’s memorandum states: Under clause 33(2), an establishment order may specify the procedure to be followed by a commons association in exercising the power to make rules, and make require a commons association to obtain the consent of the appropriate national authority before making rules. It is intended that establishment orders will normally require the appropriate national authority to approve rules in draft, and this will certainly be required where rules include criminal offences. It is also intended that establishment orders will include requirements for local consultation on a draft of proposed rules, and to ensure that rules which are brought into force are published and made available for inspection. The Department recognises that this is especially important where rules include criminal offences. 12. As the power to attract the criminal offence provisions of clause 32(1) to (4) is to be given to associations yet to be created and whose constitution is uncertain, we agree that the approval of the appropriate national authority is required. The bill enables but does not require this to be done. We recommend that the bill should state, or require an establishment order to secure, that no rule can be specified as one which it is an offence to contravene unless the Secretary of State/NAW agreed.
Clause 41 – Directions 13. Clause 36(1) prevents “restricted works” (defined in clause 36(2) and (3)) from being carried out, without the consent of the Secretary of State or NAW, on registered common land and certain other land (specified in clause 36(5)). There are exceptions specified in clause 36(6). 14. Under clause 41, the Secretary of State or NAW may by direction exempt not just particular works, works on particular land or works by a particular person, but also works of a particular description or works by persons of a particular description. The power can therefore be used to specify general categories of works to which the prohibition in clause 36(1) does not apply. Though its exercise is limited to the purposes in clause 41(3), there is no limitation on the type of works which may be specified. 15. The memorandum from Defra suggests that the exercise of this power is an administrative issue, but we consider that directions which specify descriptions of works and persons have much of the character of a legislative instrument. The effect of such a direction could (depending on its terms) be to disapply the statutory prohibition and procedures in a general way. The matters which may be disapplied include: • the criteria for granting consent set out in clause 37; • the procedures to be set out in regulations under clause 38, which may in particular provide for the making of objections or representations and a local inquiry. We consider that exemptions for descriptions of works and persons under clause 41 should be by statutory instrument subject (in the case of the Secretary of State) to negative procedure. 4 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
Conclusion 16. We draw the attention of the House to the recommendations in paragraphs 9, 10, 12 and 15. There are no further matters in relation to the delegated powers in the bill on which we wish to report to the House. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 5
CONSUMER CREDIT BILL
Introduction 17. This Bill amends the Consumer Credit Act 1974 (“the 1974 Act”) and brings licensees under that Act within the scope of the ombudsman scheme under the Financial Services and Markets Act 2000.
The Delegated Powers 18. The delegated powers in the bill are explained in a memorandum to the Committee from the Department of Trade and Industry (DTI), printed at Appendix 2 to this report. We wish to draw the attention of the House to the provision in clause 68. We consider the other delegated powers to be appropriate and subject to appropriate levels of parliamentary scrutiny.
Clause 68 19. Clause 68 enables the Secretary of State, by order subject to negative procedure, to make such modifications of Acts or subordinate legislation “as he thinks fit in consequence of any provision of this Act”. The DTI’s explanation for this level of scrutiny points to the precedent of the Enterprise Act 2002, but this pre-dates the Committee’s Special Report on this type of power which supported a presumption in favour of affirmative procedure3. Despite the fact that incidental and supplemental provision are not included, we see no reason to depart from our presumption that a power of this sort should be subject to affirmative, not negative, procedure.
Conclusion 20. We wish to draw the attention of the House to the provision in clause 68 (paragraph 19 above). We consider the other delegated powers in the bill to be appropriate and subject to appropriate levels of parliamentary scrutiny.
3 3rd Report, Session 2002–03. 6 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
REGULATION OF FINANCIAL SERVICES (LAND TRANSACTIONS) BILL 21. This Bill adds to the general descriptions of matters about which the Secretary of State may make an order under section 22 of the Financial Services and Markets Act 2000. This is described in the Explanatory Notes to the Bill. Details of the proposed order are given at paragraphs 7 to 9 of the Memorandum for the Committee from HM Treasury, printed at Appendix 3. 22. There is no matter in the bill which the Committee wishes to draw to the attention of the House. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 7
MERCHANT SHIPPING (POLLUTION) BILL [HL] – GOVERNMENT RESPONSE 23. The Committee reported on this bill in our First Report of this Session (HL Paper 10). The Government has responded positively to our recommendation by way of a letter from Lord Davies of Oldham, Deputy Chief Whip and Lords spokesman for the Department Transport, to the Chairman, which is printed at Appendix 4 to this Report.
CHILDREN AND ADOPTION BILL [HL] – GOVERNMENT RESPONSE 24. The Committee reported on this bill in our second Report of this session (HL Paper 17). The Government has responded positively to our recommendation in a letter from Lord Adonis, Parliamentary Under Secretary of State for Schools at the Department for Education and Skills, to the Chairman, which is printed at Appendix 5 to this report.
HARBOURS BILL [HL] 25. This bill contains no delegated power.
INTERCEPTION OF COMMUNICATIONS (ADMISSIBILITY OF EVIDENCE) BILL [HL] 26. This bill contains no delegated power.
RACIAL AND RELIGIOUS HATRED BILL 27. The only power this bill contains is a simple commencement power.
8 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
APPENDIX 1: COMMONS BILL [HL]
Memorandum by the Department for Environment, Food and Rural Affairs
Introduction This memorandum identifies provisions for delegated legislation in the Commons Bill, as introduced in the House of Lords on 27 June 2005. It explains the purpose of the delegated powers taken; describes why the matter is to be left to delegated legislation; and explains the procedure selected for each power and why it has been chosen. None of the regulations and orders referred to in this memorandum is yet available in draft, with the exception of draft regulations prescribing exceptions to the ban on severance of rights of common from land to which they are attached (clause 9). The original intention was for the Bill to go through pre-legislative scrutiny, but this was overtaken by the availability of a parliamentary slot early in the current session. In the time available since that decision was made it has not been possible to provide initial drafts.
Purpose and Main Provisions of the Bill
Part 1: Registration (Part 1) • Provides for accurate and up-to-date commons registers to underpin commons management, through: – a duty on local authorities to update and maintain registers of common land and town and village greens (originally established under the Commons Registration Act 1965); – providing that future transactions must be registered in order to have legal effect. • Enables commons registration authorities to correct errors in the commons registers. • Allows in limited circumstances for the registration of common land and town and village greens which was not registered under the Commons Registration Act 1965 so they are subject to the same safeguards as other commons; and enables wrongly registered land to be removed from the registers. • Bans the severance and leasing of rights of common (subject to limited exceptions), so as to maintain the link between common rights and the local community. • Allows voluntary deregistration of common land to allow development to take place where equally advantageous land is given in exchange and it is in the public interest. • Prevents the deregistration of common land in circumstances other than on an exchange (unless it was wrongly registered in the first place), to ensure its continued protection.
Part 2: Management • Provides for the establishment of self-regulating commons associations, to facilitate the sustainable agricultural management of common land at the local level. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 9
Part 3: Protection • Re-enacts section 194 of the Law of Property Act 1925 with modifications so as to: apply controls on works and fencing to all registered commons; introduce a more consistent, modern and seamless control regime, ironing out historical anomalies and bringing clarity to the application process; and extend the provisions for taking enforcement action against alleged unlawful works. • Gives local authorities power to protect common land and greens against unlawful interference where the owner of the land cannot be identified. • Gives the Secretary of State and National Assembly for Wales, the national nature conservation bodies and national park authorities a power to stop unauthorised agricultural activities which threaten to damage a common.
Part 4: Supplementary and general • Gives power to the Secretary of State and National Assembly for Wales to amend by order provisions of Acts applying to common land or town or village greens, so as to redefine the land to which they apply in a manner consistent with the Bill.
Devolution The Bill extends to England and Wales. Most delegated powers in the Bill are conferred on the Secretary of State in relation to England, and the National Assembly for Wales in relation to Wales. This has not generally influenced the Department’s decision as to which parliamentary procedure should be applied in relation to each delegated power.
Analysis of delegated powers
Part 1: Registration
Clause 3: Content of Registers Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 3(5) enables the Secretary of State or the National Assembly to make regulations regarding the information which must or may be included in registers of common land and town and village greens which commons registration authorities (local authorities) are required to maintain under Part 1. The information expected to be prescribed under subsection (5) will supplement the information required to be included in the registers by virtue of subsection (4). It is likely to include information regarding private interests in registered land (such as rights over the land other than rights of common), or matters affecting the public (such as the application to registered land of a scheme of regulation made under Part I of the 10 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
Commons Act 1899). Regulations will also be able to prescribe the form of information held in the registers. Regulations are likely to prescribe the form of the registers, and requirements as to the use of maps. These powers are necessary to ensure that commons registration authorities present the registers in a consistent, understandable form, and to ensure that, where information contained in the registers is to be treated as conclusive evidence of those matters (see clause 17), the information is registered in a proper and certain manner. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Similar powers are contained in sections 3 and 19(1)(a) of the Commons Registration Act 1965 (which the Bill re-enacts in part). These powers have previously been exercised in the Commons Registration (General) Regulations 1966 (SI 1966/1471) and it is envisaged that this power will be used in a similar way.
Clauses 6, 7, 9, 11 and 12: Registrable dispositions of rights of common Powers conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Powers exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clauses 6(3)(a), 7(3)(a), 9(4)(a), 11(a) and 12(1)(a) provide for dispositions of rights of common to be valid only where the disposition is made in a form and as to content prescribed in regulations. We expect to make regulations which will set out the requirements as to the form of a disposition, and require certain information to be included, such as the consent of other parties (where appropriate), or a certificate that the intention to make a disposition has been notified to other parties. These dispositions are required by the Bill to be registered to be effective in law, and it is intended to prescribe requirements as to the form and content of dispositions so that they are presented in a consistent and complete form which is readily understandable by the commons registration authority and others when an application for registration is made. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Similar powers for certain of the purposes included in these clauses are contained in section 13 of the Commons Registration Act 1965. These powers have previously been exercised in the Commons Registration (General) Regulations 1966 (SI 1966/1471) – see in particular regulation 29 – and it is envisaged that this power will be used in a similar way. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 11
Clause 8: Apportionment Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 8(1) and (2) enables regulations to make provision as to the amendments to be made to a register where a registered right of common is apportioned. Apportionment occurs where land to which rights of common are attached is divided into two or more parcels in separate ownership, e.g. on a sale of part of the land, and a proportion of the rights of common becomes attached to each part of the land. In general, it is not proposed that apportionments of rights of common should be registrable, but it is intended that regulations should provide for apportionments to be registered in certain circumstances, where it is necessary to do so in order to register a later disposition of the apportioned rights. A more detailed explanation is given in paragraphs 43–45 of the Explanatory Notes to the Bill. This power has been delegated as the provision that it is proposed to make is of a technical and detailed nature. The negative resolution procedure is considered appropriate.
Clause 9: Severance Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales), and commons associations established under Part 2 of the Bill Power exercisable by: Statutory Instrument (Regulations) and rules made by commons associations under Part 2 of the Bill Parliamentary procedure: Negative resolution (in relation to regulations). Rules made by commons associations will not be subject to Parliamentary procedure, but the power to make such rules will be conferred by an order under clause 25 establishing a commons association (which will be subject to negative resolution) and the rules will be subject to approval by the appropriate national authority.
Clause 9 prohibits the severance of rights of common from land to which they are attached, by selling or leasing the rights of common separately from that land, or by retaining the rights of common upon disposing of that land. Subsection (5) provides that the Secretary of State or National Assembly may make regulations and rules to prescribe exceptions to the general prohibition on severance effected by this clause. Draft regulations to be published shortly, and submitted with this memorandum (see Annex A), make provision to permit the temporary leasing or licensing of grazing rights to continue for periods not exceeding two years in duration, where such leases or licences were lawful before the date on which clause 9 comes into force, and to permit grazing rights to be retained by the owner of the freehold for his own use if he leases or licences the land to which the rights are attached. We expect that further regulations will be made in due course, following public consultation, which will restrict the circumstances in 12 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE which grazing rights may be let with exceptions for particular commons or situations where we are satisfied that the temporary severance is in the interests of the good management of the common land. These powers are necessary to ensure that the prohibition on the severance of rights of common contained in clause 9 is subject to sensible exceptions to take account of local circumstances, long-standing tradition and good management practice. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged, including provision in relation to particular commons, and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Subsection (14) provides that regulations made under subsection (5)(a) may have effect retrospectively as from 28 June 2005. This is because the prohibition on severance in clause 9 will be deemed to have come into force on 28 June 2005, in order to prevent commoners severing rights of common after the introduction of the Bill but before it obtains Royal Assent, thus making it necessary to bring the exceptions to the prohibition into force on the same date.
Clause 13: Statutory dispositions Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 13 enables the Secretary of State and the National Assembly for Wales to make regulations to prescribe requirements as to the registration of any statutory disposition affecting the registers of common land and town and village greens. Such dispositions will be made under or pursuant to various enactments which may cause land to become or cease to be common land or a town or village green, or which may create or extinguish rights of common. The most common examples are those referred to in subsection (3)(a) and (b) — compulsory purchase orders under the Acquisition of Land Act 1981, and conveyances of land for ecclesiastical purposes under the New Parishes Measure 1943. Regulations are likely to prescribe the procedure which must be followed by the instrument-making body (or a body confirming an instrument) in ensuring that the effect of the instrument is reflected in an amendment to the appropriate register. Regulations may also prescribe that a relevant instrument is not to have effect at law until the necessary amendment is made to the register. For example, where a conveyance is made of common land for the purposes of building a church under the New Parishes Measure 1943, regulations may provide that the conveyance is not to have effect in causing the land conveyed to cease to be common land until the land is removed from the register. These powers are necessary to ensure that relevant instruments affecting entries in the commons registers are notified to commons registration authorities so that the registers are kept up-to-date and accurate. Regulations will ensure that notification is made promptly in an accurate, consistent, understandable form. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide a flexible mechanism to deal with the large number of enactments (including those in private and local legislation) under which instruments may be made which may affect entries contained in the commons registers. The negative resolution procedure is considered appropriate. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 13
Clause 14: New greens Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 14 permits applications to be made to register land as a new town or village green, where the land has been used as of right by the inhabitants of a locality or neighbourhood for lawful sports and pastimes for a period of at least 20 years. The 20 years’ use may either be continuing at the date of the application for registration (subsection (2)), or have ceased before that date (subsection (3)). In cases where the use has ceased, subsection (3)(c) includes a power for regulations to be made specifying what period of time can elapse between use ending, and the registration application being made. This is necessary because it can take some time to put together all the necessary evidence of use that is needed to accompany an application. We consider that powers are needed to address this. Clause 14(4) also enables the regulations to contain provisions setting out the steps that landowners must take to end lawful use as of right. This is to ensure that if a time limit for the submission of applications is introduced, local inhabitants will know by what date an application for registration must be lodged. These provisions are best set out in secondary legislation due to the need for further consultation on what might be an appropriate period to allow for an application to be submitted, and on the steps landowners should take to end use as of right. In the past we have suggested that the time period might be two years, but we consider it necessary to take the views of all interested parties before coming to a conclusion on both these issues. The negative resolution procedure is considered appropriate.
Clause 16: Deregistration orders Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Order (subsections (1), (2) and (7)); Regulations (subsections (3) and (10)) Parliamentary procedure: None (orders). Negative resolution (regulations).
Clause 15 enables the owner of land registered as common land or a town or village green to apply to the appropriate national authority for the land to cease to be so registered, and (in most cases) for other land to be registered in exchange. Subsection (1) of clause 16 requires the appropriate national authority, where it grants an application under clause 15, to make an order requiring a commons registration authority to remove the land from its register. Subsection (2) provides that the order shall, where appropriate, require the commons registration authority to register replacement land. Subsection (7) sets out supplementary matters which an order may contain. These powers are necessary to ensure that there is flexibility for registered common land and green to be removed from the register and used for other purposes, while providing protection for the interests in that land (including the public interest in access for 14 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE recreation) by ensuring that, in all but de minimis cases, substitute land is given in exchange. These requirements relate to essentially local circumstances, and orders are therefore not to be made by statutory instrument nor to be subject to Parliamentary scrutiny. Similar powers are contained in section 147 of the Inclosure Act 1845 (to be repealed by Part 3 of Schedule 5 to the Bill) and it is envisaged that this power will be used in a similar way. The Secretary of State has inherited the functions of the Inclosure Commissioners referred to in the 1845 Act. Under subsection (3), regulations may specify other steps which commons registration authorities are required to take upon receiving an order under this clause. This power may be used to deal with supplemental matters, such as notifying persons of amendments made to the register. Subsection (10) allows regulations to make provision for the publication of an order under this clause. We consider the negative resolution procedure appropriate for these regulations.
Clause 18: Correction Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Subsection (6) enables the Secretary of State and the National Assembly for Wales to make regulations regarding the criteria to be applied by a commons registration authority in determining an application or proposal to make a correction to its registers. A correction may be proposed in response to an application or on the commons registration authority’s own initiative. These powers are necessary to ensure that commons registration authorities are obliged to apply consistent criteria in deciding whether to make the correction proposed. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Similar powers are contained in section 19(1) of the Commons Registration Act 1965 (which the Bill re-enacts in part). These powers have previously been exercised in the Commons Registration (General) Regulations 1966 (SI 1966/1471) and it is envisaged that this power will be used in a similar way.
Clause 19: Inspection Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Subsection (2) enables regulations to be made regarding inspection of the registers and ancillary documents held by commons registration authorities. We expect that regulations will amplify how the right of inspection may be fulfilled in relation to electronic registers, DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 15 and prescribe exceptions in relation to the right of inspection of ancillary documents (for example to protect personal privacy). We have no plans to impose a requirement to pay fees in relation to personal inspections of the register, but fees may be appropriate where an authority is required to make available (and perhaps sift) large numbers of archived ancillary documents. These powers are necessary to ensure that adequate provision is made for inspection of registers and ancillary documents, such as prescribing exceptions to the general rule that such documents are to be open to inspection. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate.
Clause 20: Official copies Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Subsection (3) enables the Secretary of State and the National Assembly for Wales to make regulations regarding the provision of official copies of the registers, including to prescribe the form of application, and the payment of fees. These powers are necessary to ensure that there is a universal mechanism for requesting commons registration authorities to supply official copies of the registers, and that applications for copies are presented in a complete, consistent and understandable form. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Similar powers are contained in section 19(1)(d) of the Commons Registration Act 1965. These powers have previously been exercised in the Commons Registration (General) Regulations 1966 (SI 1966/1471) — see in particular regulations 33–34, as amended — and it is envisaged that this power will be used in a similar way.
Clause 21 and Schedule 1: Rectification of mistakes etc under the 1965 Act Powers conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Powers exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Schedule 1 permits applications to be made to commons registration authorities to amend their registers to correct certain types of mistakes made under the Commons Registration Act 1965. Paragraphs 2(1), 3(1), 4(1) and 5(1) enable regulations to specify a date before which applications under this Schedule must be made. It is intended that a period of several years following the commencement of the Bill will be allowed for such applications. The 16 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE power has been taken to specify the final date for such applications in regulations because it is intended to commence Part 1 of the Bill at different times in different areas, and therefore the final date for applications under Schedule 1 will vary in different areas. Paragraph 6 enable regulations to make provision as to the payment of costs of an application under this Schedule. Only limited use is intended to be made of this power, as we do not propose that commons registration authorities should routinely have power to award costs when they determine an application. However, it is intended that where an application under Schedule 1 is contested, an independent person (such as an experienced barrister) will be appointed to inquire into or determine the application on behalf of the commons registration authority, under the power in clause 23(6), and that in such cases costs may be awarded if an application or objection is found to have been frivolous or vexatious, or a party’s conduct in relation to the application is unreasonable. The negative resolution procedure is considered appropriate for these powers.
Clause 22 and Schedule 2: Registration: transitional provision Powers conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Powers exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Schedule 2, paragraph 2 — provision for updating registers during transitional period Schedule 2, paragraph 2 makes provision for transitional procedures to ensure that the registers currently maintained by commons registration authorities are brought up-to-date before the new regime in Part 1 of the Bill is implemented in full. Regulations may be made by the Secretary of State and the National Assembly for Wales to ensure that qualifying events are captured in the registers. Qualifying events are those which have taken place generally between 1970 and the implementation of Part 1, and which have not been reflected in an amendment to the registers under section 13 of the Commons Registration Act 1965. Regulations will make provision as to applications to register qualifying events, and the steps to be taken by registration authorities in registering such events (whether discovered by a registration authority itself or in response to an application). These powers are necessary to ensure that the registers held by commons registration authorities are brought up-to-date using a common, widely understood procedure, that applications for amendment of the registers are presented in a complete, consistent and understandable form, and to ensure that commons registration authorities are obliged to take recognised steps to decide whether to make the amendments proposed. Schedule 2, paragraph 4 — provision for updating registers after end of transitional period Schedule 2, paragraph 4 enables regulations to make provision for registers to be amended after the end of the transitional period, in circumstances specified in the regulations. This is to enable a late application for amendment of a register in consequence of a qualifying event to be entertained if an applicant has a sufficiently good reason for failing to apply during the transitional period. It is intended that regulations will provide that such late amendments are made only where it would be fair to do so having regard to the reliance which other persons may have placed on the affected entries in the registers. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 17
These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Schedule 2, paragraph 7(3) — removal of registration of ownership of land from registers Paragraph 7(3) enables the Secretary of State and the National Assembly for Wales to make regulations requiring the deletion of the ownership section of the registers required to be maintained by commons registration authorities under the Commons Registration Act 1965. These powers are necessary because the ownership section of the registers is expected to become redundant in consequence of the increasing registration of title to land in the register of title under the Land Registration Act 2002. In due course, it is expected that the ownership of most common land will be registered under the 2002 Act, and there will be little continued purpose in commons registration authorities maintaining the ownership sections of the registers. These requirements are best set out in secondary legislation owing to the fact that it cannot reasonably be foreseen how long it will be before the ownership sections of the registers are redundant. The negative resolution procedure is considered appropriate.
Clause 23: Applications etc Powers conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Powers exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 23(1)to (3) — applications to commons registration authorities and the appropriate national authority under Part 1 of the Bill Clause 23(1) enables the Secretary of State and the National Assembly for Wales to make regulations regarding the form of any application permitted or required to be made under Part 1 of the Bill. Applications may be made to commons registration authorities under clauses 6–14 and 18, paragraphs 2–5 of Schedule 1 and paragraph 2 of Schedule 2, and to the appropriate national authority under clause 15. We expect regulations about applications to deal with such matters as are set out in subsection (2), including restricting the right of application to a person with an interest in the right or land affected by the application, prescribing the form of an application, and enabling commons registration authorities and the appropriate national authority to charge any reasonable fee in connection with an application. These powers are necessary to ensure that applicants under Part 1 of the Bill present information in a complete, consistent and understandable form, and to ensure that commons registration authorities are obliged to take recognised steps to decide whether to make the registration (or amendment to a register entry) sought by the applicants. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Similar powers are contained in sections 3 and 19 of the Commons Registration Act 1965 (which the Bill re-enacts in part). These powers have previously been exercised in the 18 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
Commons Registration (General) Regulations 1966 (SI 1966/1471) and it is envisaged that this power will be used in a similar way. Clause 23(4) and (5) — amendment of registers by commons registration authorities on their own initiative Clause 23(4) enables regulations to make provision as to the making and determination of any proposal by a commons registration authority to amend a register on its own initiative pursuant to section 18 or paragraph 2(5)(b) of Schedule 2. Subsection (5) indicates the matters likely to be included in such regulations, including a requirement to publish a proposal and provide an opportunity for objections before amending a register. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Clause 23(6) — delegation of functions of commons registration authorities and the appropriate national authority Clause 23(6) confers a broad power for regulations to provide for delegation of functions of a commons registration authority or the appropriate national authority in connection with an application under Part 1 of the Bill. This power is intended to be used in two ways. First, regulations will enable a commons registration authority to appoint a person, such as an experienced barrister, either to determine an application on its behalf, or to conduct an inquiry into the merits of an application and make a recommendation to the authority. Such a power is needed for cases where the determination of an application requires special legal or other expertise; the person appointed will fulfil a role similar to that of Commons Commissioners under the Commons Registration Act 1965. Secondly, it is intended to provide for the appropriate national authority to be able to delegate its function of determining applications under clause 15 to an external body, such as Natural England or the Countryside Council for Wales. The extent of these powers to delegate is best set out in secondary legislation to provide the flexibility to respond to changing circumstances. The negative resolution procedure is considered appropriate. Clause 23(7) — power for Church Commissioners to act with respect to ecclesiastical land or rights Clause 23(7) enables regulations to provide for the Church Commissioners to act with respect to any land or rights belonging to an ecclesiastical benefice of the Church of England which is vacant. This re-enacts existing provision in section 19(1)(g) of the Commons Registration Act 1965. The negative resolution procedure is considered appropriate.
Clause 24: Electronic Registers Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 24 enables the Secretary of State and the National Assembly for Wales to make regulations about the keeping of registers in an electronic form, and the conversion of paper registers to an electronic form. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 19
Under subsection (1), regulations may either permit registers to be held in an electronic form, or require authorities to convert registers to an electronic form. We expect that regulations will deal with such matters as the requirements of the software used for the purposes of accommodating an electronic register. For example, regulations may require that alterations to significant data, such as common land boundaries or quantification of rights, may not be made without an audit trail being retained showing on what authority the alteration was made and when. Regulations will also require consultation on the conversion of a register to electronic form, and provide for the registration authority to take comments into account in deciding whether and how to implement the conversion. These powers are necessary to ensure that, where commons registration authorities hold commons registers in an electronic form, they do so in accordance with certain standards which guarantee the quality and validity of the data. They also enable registration authorities to validate the conversion of data to an electronic form through public consultation. These powers enable the Secretary of State and the National Assembly for Wales to require authorities to convert their registers to an electronic form: we expect that this is likely to happen where authorities appear to be seriously behind in delivering the Government’s commitment to e-Government. These requirements are best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. Moreover, we have no plans at present to make regulations requiring authorities to convert their registers to an electronic form, but think it sensible to hold such powers in reserve in view of the Government’s targets for e-Government. The negative resolution procedure is considered appropriate. The powers are consistent with the provision which might be made by order under section 8 of the Electronic Communications Act 2000 but go further in that regulations under clause 24 may require the conversion of registers to an electronic form, and that a registration authority may be required to consult on a conversion.
Part 2 — Management: Commons Associations
Clauses 25 and 26: Establishment orders Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Order) Parliamentary procedure: Negative resolution
Clause 25 allows the Secretary of State or National Assembly for Wales to create commons associations in the form of corporate bodies. Subsection (4) requires that a commons association is to be established by order (an “establishment order”). Under subsection (5), an establishment order must identify the specific land area or areas over which an association may carry out its functions, and the name of the association. In addition, Clause 26 sets out the steps the Secretary of State or National Assembly must follow in making an establishment order. This includes publishing and consulting on a draft establishment order, and if necessary, holding a local inquiry to decide whether to make the order. The power to establish commons associations has been left to secondary legislation for three main reasons: • to facilitate the establishment of more commons associations; 20 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
• to enable there to be local level input into the formation of each commons association; • to provide a flexible approach to the creation of commons associations, whereby each association may be given individually tailored functions and provisions of its constitution that reflect local circumstances and needs. At present, statutory commons associations can only be formed through private Acts of Parliament. This is very resource intensive and as a result only two have been created (the Dartmoor Commoners’ Council and the Greenham and Crookham Commons Commission). These bodies have proved effective in carrying out the sustainable agricultural management of the commons in respect of which they were established, and the Department wishes to make it easier to establish similar bodies in respect of other commons. The order-making power under clause 25 will facilitate this. A further fundamental aim of delegating this power is to obtain local level input into the formation of each association, to enable local management of commons. Each association will be unique. Clause 26 provides for the protection of different interests by allowing representation by interests at the order-making stage, and through the provision to require substantial support for making an order creating an association. This recognises that commons associations will not operate effectively unless supported by the majority of local interests in the common. A draft order is unlikely to be proposed without some level of local input and support. It will also identify key objections which can then be dealt with through changes to the proposed establishment order, or may be so significant as to prevent the formation of an association. Due to the huge variation in commons themselves and the ways in which agricultural activity is practised, it is essential that we provide a flexible approach to the creation of commons associations. It would be impossible to specify on the face of the Bill where associations should be formed, their geographic scope, or which functions they should be given. Clauses 28 to 33 include further powers for establishment orders to include provisions as to the constitution and functions of commons associations. These are discussed separately below. The negative resolution procedure is considered appropriate for establishment orders, having regard to the procedural safeguards in clause 26.
Clauses 28 and 29: Constitution Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 28(1) requires the Secretary of State or National Assembly to make regulations specifying standard terms for the constitution and administration of all commons associations (a “standard constitution”). This will address all the requirements for a constitution and in particular those elements listed in clause 29. The standard constitution will include terms relating to many of the matters needed to ensure the smooth operation of any organisation, such as conduct of members, auditing and reporting arrangements, terms of office. Such requirements are best set out in secondary legislation owing to the level of detail that is envisaged. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 21
By virtue of clause 28(2)–(5), the standard constitution will apply to a commons association subject to any modifications or supplementary provisions contained in the order establishing that association. This power to vary the terms of the standard constitution is necessary because each association will differ in terms of the number of commons involved, the number and type of commoners (e.g. active and inactive rights holders, and those with rights of pasture, estover or turbary), the number of landowners, and the form and extent of agricultural activities. The most contentious elements in the creation of any association is expected to be the representation of interests on the governing body, and voting mechanisms for electing representatives to the governing board. It is expected that in most cases an establishment order will include terms varying or supplementing the standard constitution in respect of these matters, because they can only be decided when the extent (in terms of exactly which common or commons will become part of the association) of a commons association is known. The power to make regulations containing a standard constitution for all associations, in conjunction with a specific establishment order for each commons association is therefore necessary to ensure that they are tailored to local conditions to allow efficient local management practices to develop. The negative resolution procedure is considered appropriate for regulations prescribing the standard constitution.
Clauses 30–33: Functions of commons associations These clauses include further provision about the contents of establishment orders under clause 25. Clause 30(1) requires an establishment order to specify the functions conferred on a commons association in order to achieve its purpose of protecting and promoting sustainable agriculture. Clause 30(3) contains an list of functions which may be conferred on an association. These include the making of rules relating to the agricultural use of the land, and the leasing or licensing of rights of common (clause 30(3)(a) and (b)). The list of functions in clause 30(3) is only indicative; the specific functions which an association might be granted will depend on the local circumstances on the commons over which it will have jurisdiction. However, the Department expects that all commons associations will be granted the functions of making rules concerning agricultural use of the common, limiting or imposing conditions on the exercise of rights, and requiring information on the use of rights, since these will be essential elements in the management of agricultural activities. By virtue of clause 32(2), a rule made by a commons association may specify that a person who contravenes it is guilty of an offence. The maximum penalty for such an offence is specified in clause 32(3). It is not necessarily contemplated that all commons associations will be given power in their establishment order to make rules which include criminal offences; this is a matter which the appropriate national authority will consider when making each establishment order. It is envisaged that rules including criminal offences will be similar in nature to byelaws made by local authorities under section 235 of the Local Government Act 1972. Examples of rules the breach of which might be made a criminal offence include requirements to keep animals off a common to enable control of disease, or restrictions on the number of animals that may be put on to a common. Under clause 33(2), an establishment order may specify the procedure to be followed by a commons association in exercising the power to make rules, and make require a commons association to obtain the consent of the appropriate national authority before making rules. It is intended that establishment orders will normally require the appropriate national authority to approve rules in draft, and this will certainly be required where rules 22 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE include criminal offences. It is also intended that establishment orders will include requirements for local consultation on a draft of proposed rules, and to ensure that rules which are brought into force are published and made available for inspection. The Department recognises that this is especially important where rules include criminal offences. The ability of the appropriate national authority to confer functions on a commons association in its establishment order is necessary to ensure they are tailored to the individual circumstances. For example, on a large set of contiguous commons it may be essential to maintain a register of the exercise of rights for management purposes, whereas it may be more of a burden than a help on a series of small and independent set of commons. The ability to require rules to be approved by the Secretary of State or National Assembly provides a safeguard on the protection of minority or other interests who might be unduly harmed by a rule adopted through majority voting in an association, and ensures that rules have sufficient regard to the public interest in the common land to which they apply. It has also been left to secondary legislation to prescribe the procedure to be followed in making rules, since the detail of such requirements might differ from case to case depending, for example, on the extent of the rule making powers conferred on an association, and whether its rules might affect the general public or only a limited class of people with interests in a common.
Clause 34: Overlapping Functions Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Order) Parliamentary procedure: Negative resolution
Clause 34(1) gives the appropriate national authority power to make provision by order to deal with cases where the establishment of and conferral of powers on a commons association might conflict with existing Acts or schemes of management, or with ancient manorial courts that still have jurisdiction in relation to common land. Such provisions are likely to be included in an establishment order under clause 25, although they might also be made in a separate order. Under clause 34(2)(a), the Secretary of State or the National Assembly may alter or remove any remaining powers of ancient courts over land where they might conflict with the functions of a commons association. The powers of ancient manorial courts were curtailed by section 23 of the Administration of Justice Act 1977 (and in particular their power to determine legal proceedings was abolished), but a number of such courts still exist and, in some cases, retain powers relating to the management of particular commons. For example, the Danby Court Leet and Court Baron continues to have power to manage and allocate grazing rights over Danby Low Moor and Danby High Moor in North Yorkshire. Clause 34(2)(b)–(e) allows for existing management schemes under specific identified pieces of legislation, or any local Act, to be amended or repealed — but only insofar as they relate to the maintenance or management of commons, or the exercise of common rights. This includes power to amend or repeal certain Acts. Subsection (2)(d) allows for the amendment or repeal of any Act made under the Commons Act 1876 confirming a provisional order of the Inclosure Commissioners. There remain in force 36 Provisional DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 23
Order Confirmation Acts made between 1876 and 1919, each of which confirms an order made by the Inclosure Commissioners regulating the use or management of a particular area of common land. Subsection (2)(e) allows for the amendment or repeal of any local Act. The intention of this clause is to deal with potential problems where existing management schemes or ancient manorial courts for specific commons might prevent the creation of a commons association, limit its functions (and perhaps its capacity for achieving sustainable agriculture), or conflict with the powers of an association once it is established. Commons associations are likely in most cases to be established in respect of a group of commons in a local area, since it is unlikely that the persons with interests in a single small or even medium-sized common will have the resources to undertake the administrative burdens of operating an association, and larger organisations will often have greater capacity to ensure effective commons management. There is a concern that this may conflict with older management arrangements, often focused on a single common, and designed to deal with the problems existing in the nineteenth century, or even earlier in the case of manorial courts. There is no intention to do away with these arrangements where they work effectively. However, where they do not work well or where an existing scheme of management might prevent a particular common from becoming part of the land under the control of a larger commons association, then it seems appropriate to alter their powers so as to ensure there is no conflict with the functions to be carried out by a new commons association — or in exceptional cases, to remove them entirely. It is necessary to delegate these power to secondary legislation since they will only fall to be exercised in relation to areas where a commons association is established, and it is not presently known which those areas will be. Amendments to Provisional Order Confirmation Acts or to local Acts could not be included in the Bill for that reason. The negative resolution procedure is considered appropriate for orders under this clause, since the power to amend Acts is very specific and limited.
Clause 35: Variation and revocation of establishment orders Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Order) Parliamentary procedure: Negative resolution
Clause 35 allows the Secretary of State or the National Assembly to wind up a commons association by order in certain circumstances as set out in clause 35(1). The order is made under the powers given in clause 25. The same procedure for creating an association must be followed, i.e. consultation and substantial support from local interests for an order to wind up an association. Subsection (2)(b) provides powers to amend or repeal any enactment that was previously altered (under Section 34) to allow the association to function more effectively. This ensures that any changes previously made to management schemes on a common to accommodate the new association will not result in lack of protection or powers to manage a common if the association is wound up at a later date. This will prevent associations from lingering on where they are ineffective, deficient, or no longer functioning properly. In such cases the mere existence of an association with powers to manage agricultural activities may prevent the development of more effective 24 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE forms of management, or impose undue burdens on interests in a common where agricultural activity may have ceased. Similarly to establishment orders under clause 25, this power is best set out in secondary legislation owing to the level of detail that is envisaged and to provide the flexibility to respond to changing circumstances. It will also allow for further consultation as we consider it necessary to take the views of both landowners and applicants before reaching a decision on varying or revoking an order.
Part 3: Protection
Clause 38: Consent: procedure Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 38 provides that regulations may be made by the Secretary of State or the National Assembly to set out the procedures to be followed by the applicant, the Secretary of State or National Assembly, and any interested parties in relation to a consent application. Regulations made under this power are intended to cover essentially administrative issues, such as the form and content of the application, the evidence to be supplied by the applicant and the steps to be taken by the national authority on receipt of an application. Regulations will also enable the decision in a particular case to be delegated to an appropriate person, such as a Planning Inspector. They will also enable the national authority to delegate responsibility for determining applications under this clause to another person or body, such as Natural England. Different regulations can be made for different types of application, if appropriate. These powers are necessary to ensure that applications are handled in a consistent way and the procedure followed in all cases represents best practice and is appropriate to the application being considered. These specifics are best set out in secondary legislation due to the level of detail that is included and to provide the flexibility to respond to changing circumstances. It is considered that the negative resolution procedure is appropriate.
Clause 41: Power to exempt Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Direction Parliamentary procedure: None
Clause 41 gives the appropriate national authority the power to issue a direction exempting certain works from the controls in clause 36. A direction may allow a person or body to undertake specific works, or a particular type of works, on a common or commons. This power provides the flexibility to enable certain works to be undertaken without the need to seek the consent of the national authority. Directions can only be sought in relation to works related to the use of the common for the exercise of common DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 25 rights or for public access. It is intended that directions will be issued to avoid the need for bodies such as local authorities to have to apply to the appropriate national authority for consent before carrying out works of a minor nature, such as fencing round dangerous objects, or installing seating or lighting. A direction can be made subject to whatever terms and conditions the national authority considers appropriate. We regard the exercise of this power as an administrative issue and directions are not to be made by statutory instrument nor to be subject to Parliamentary scrutiny.
Clause 42: Supplementary Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Regulations) Parliamentary procedure: Negative resolution
Clause 42 provides power for the appropriate national authority to amend any local power for the purpose of making provision about works on common land to which that Act relates. It is intended to use this power, if necessary, to amend any provisions in local Acts which control works on particular common land that are inconsistent with clauses 36–38, so as to make the local Acts consistent with those clauses. For example, if a local Act requires the national authority’s consent for certain types of work, we would propose to amend it to provide that the decision-making criteria and procedures in this Part of the Bill apply to any application for such consent. There has not been time to research each and every local Act which may contain controls on works on common land, so it has been necessary to take a power to amend such Acts by regulations. This power to amend local Acts is limited and specific in its nature, and it is therefore considered appropriate for it to be subject to the negative resolution procedure.
Part 4: Supplementary and General
Clause 49: Power to amend enactments Power conferred on: The appropriate national authority, being either the Secretary of State (in relation to England) or the National Assembly for Wales (in relation to Wales) Power exercisable by: Statutory Instrument (Order) Parliamentary procedure: Affirmative resolution
Clause 49 enables the appropriate national authority to amend by order any provision in a public general Act which applies to common land or town or village greens, so as to vary the land to which the provision applies in the manner set out in subsections (1) and (2). The purpose of this power is to be able to amend Acts so as to achieve greater consistency and clarity as to the land to which statutory provisions relating to common land or town or village greens apply. In particular, existing enactments relating to common land at present use a variety of different expressions, and define expressions such as “common”, “commons” or “common land” in different ways, sometimes by reference to very old legislation such as the Inclosure Acts 1845–1882. It is envisaged that the power in this 26 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE clause will be used to amend such provisions so that as far as possible they apply consistently to land registered as common land or a town or village green, or land which is exempt from registration under Part 1 of the Bill. This will further the policy objective that the registration of land under Part 1 of the Bill should generally determine whether land is to be regarded as common land or a town or village green for all purposes. This power has been delegated because, due to the large number of statutory references to “common land” or similar expressions, it has not been possible in the time available before introduction of the Bill to determine exactly how each provision ought to be amended. In some cases it will also be desirable to consult on whether and how to amend enactments. Moreover, it is intended that amendments will not be brought into force until a number of years after commencement of Part 1 of the Bill, following the completion of the process of correcting errors in commons registers and bringing them up to date pursuant to Schedules 1 and 2 to the Bill. We see the proposed amendments to enactments as a second stage of legislative reform, once the accuracy and completeness of the commons registers has been improved. In our view all these matters make it desirable to take power to make such amendments by order. We consider it appropriate for orders under this clause to be subject to the affirmative resolution procedure. July 2005 APPENDIX 2: CONSUMER CREDIT BILL
Memorandum by the Department of Trade and Industry
Introduction 1.1. This memorandum identifies provisions dealing with delegated legislation in the Consumer Credit Bill (the “Bill”).
Rationale and Overview of powers delegated to the Secretary of State 2.1. The Consumer Credit Act 1974 (“1974 Act”) confers a large number of delegated powers on the Secretary of State. They allow the making of orders or regulations for various purposes including: (a) the exemption of specified types of agreement or lender from requirements of the Act; (b) prescribing time periods and time limits for various acts; (c) specifying information to be given to debtors and hirers; (d) the conduct of the appeals process against determinations of the Office of Fair Trading (“OFT”) which administers the licensing system under the Act; (e) regulating the conduct and seeking of business; (f) setting out the form and content of various documents from credit advertisements to credit agreements to cancellation notices; and (g) altering monetary amounts set out in the Act. For example, section 60(1) provides a power for the Secretary of State to make regulations as to the form and content of documents embodying regulated consumer credit agreements1. 2.2. The majority of the provisions of the Bill operate by way of amendment of the 1974 Act. The delegated powers for the Secretary of State being introduced in the Bill are of a similar kind to those in the 1974 Act. In some cases the Bill replaces a current delegated power and in others it provides for additional delegated powers. 2.3. We set out below details of each clause of the Bill conferring delegated powers on the Secretary of State. We have not provided draft statutory instruments for two reasons: (a) first, in some cases, as with the power under clause 5(7) to alter the financial limit in new section 16B, there are no current plans to use the power; (b) second, the powers in the Bill relate to matters that will impact upon consumer credit licensees in the operation of their day-to-day business: the vast majority of them, for example, will prescribe information to be given by creditors and owners and form and content requirements of business documents. There is therefore a need for wider consultation on the proposed secondary legislation and any draft instruments may be seen to pre-determine this process.
1 Regulations: The Consumer Credit Agreements Regulations 1983, SI 1983/1553, as amended by SI 1984/1600, SI 1985/666, SI 1988/2047, SI 1999/3177, SI 2001/3649, SI 2004/1482 and SI 2004/3236. 28 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
Powers delegated to the Office of Fair Trading 3.1. As well as the powers delegated to the Secretary of State, the 1974 Act also provides the OFT with the power to specify certain matters by general notice and to make determinations in relation to licensing matters. As noted above, the Act gives OFT the function of administering the licensing system established by the Act. These powers of OFT are exercisable without any Parliamentary procedure. However OFT must publish general notices “at a time and in a manner appearing to it suitable for securing that the notice is seen within a reasonable time by persons likely to be affected by it” (see section 189(1) of the 1974 Act). 3.2. The 1974 Act allows OFT to issue general notices in a number of circumstances. In particular, OFT issues general notices in relation to group licences, i.e. licences issued by OFT under the Act which cover such persons and activities as are described in them – see section 22 of the 1974 Act. Use of general notices ensures that information regarding the terms or other matters to do with a group licence are brought to the attention of the persons covered by the licence. This removes the need to issue individual notices to all those licensees covered by a group licence. 3.3. The 1974 Act also allows OFT to issue general notices to specify fees, specify the details to be included in licence applications, give notice of its determinations in relation to group licences and give details of the information to be included in the register kept under section 35 of the 1974 Act. All of these are matters relevant to the general functions of OFT set out in section 1 of the 1974 Act including the administration of the licensing system set up by the Act. 3.4. The Bill gives OFT additional powers to issue general notices in order to: (a) give notice of arrears and default information sheets produced by it which creditors and owners will need to give to debtors and hirers in specified circumstances (clause 8); (b) specify the charge on applicants for licences (clause 27); (c) specify the description of business to be set out in an application for a standard licence (clause 28); (d) specify activities which require to be covered by an express term in the licence (clause 33); (e) specify the form that a notice to terminate a licence must take (clause 34); (f) specify the periodic charge for an indefinite licence (clause 35); (g) specify the period in which a licensee can apply for an extension of time to pay the licence fee (clause 36); (h) specify the period within which further information or documents are to be provided in relation to licence applications (clause 44); (i) notify that a civil penalty has been imposed under a group licence (clause 53); (j) give notice of determinations about the funding of the ombudsman scheme so far as it relates to consumer credit and the imposition of requirements upon licensees to pay an amount towards that funding (clause 60); (k) specify classes of agreements exempt from section 101 of the 1974 Act and appropriate conditions (clause 63). 3.5. Details of these additional powers of OFT are included at the end of this memorandum for completeness’ sake. However, we have not dealt with them in the DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 29 clause-by-clause analysis of the Bill below as the rationale behind all the general notice provisions and the procedure applying to the issue of the notices is the same in each of the cases listed above.
Powers delegated to the Lord Chancellor 4.1. The Bill gives the Lord Chancellor the power to make rules regulating the conduct and disposal of appeals before the Consumer Credit Appeals Tribunal to be established under the Bill (clause 55). Clause 58(2) provides that the power to make the rules is exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament. Further details of this power are given below in the clause-by- clause analysis of the delegated powers in the Bill (see paragraph 7).
Powers delegated to the Board of the Financial Ombudsman Service 5.1. The Bill gives certain powers to the Financial Ombudsman Service (“FOS”) relating to the administration and operation of the new consumer credit jurisdiction introduced in clause 59 of the Bill. These powers are: (a) the making of rules by the Board of the FOS as to how the ombudsman scheme will operate (see clause 59 of the Bill, which inserts new clause 226A(7) into the Financial Services and Markets Act (“FSMA”); (b) the setting of a levy to be collected by OFT for the purpose of funding the operation of the ombudsman scheme (see clause 60 of the Bill, which inserts new clause 234A into FSMA). In both circumstances, FOS requires the approval of the Financial Services Authority (“FSA”) before it may make or amend the rules or set the levy. FOS must inform the OFT of any levy it sets under new section 234A of FSMA. These powers and the requirements for FSA approval for their exercise are in line with the powers and requirements currently given to and imposed on FOS in relation to the conduct of the other jurisdictions of the ombudsman scheme established under Part 16 of FSMA. 5.2. Details of FOS’ additional powers are included at the end of this memorandum for completeness’ sake. However, we have not dealt with them in the clause-by-clause analysis of the Bill below, as the rationale behind them and the procedure applying to their use is the same in each case.
Parliamentary Scrutiny 6.1. It would not be appropriate for the delegated powers given by the Bill to the Secretary of State to be subject to a different level of parliamentary scrutiny than that which applies to the Secretary of State’s existing powers under the Act since the Bill is principally concerned with amending that Act. These existing powers are exercisable by statutory instrument subject to negative resolution procedure in the vast majority of cases2. The delegated powers proposed to be conferred by the Bill would therefore be exercised by means of a statutory instrument made by the Secretary of State and subject to negative resolution procedure. 6.2. The exceptions to this are: (a) commencement orders made under clause 71 which, as is usual, would not be subject to Parliamentary scrutiny; and
2 The exceptions are section 2(1)(a), 181 and 192 – see section 182(1). 30 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
(b) transitional provision and savings orders made in connection with commencement of provisions of the Bill and which would also therefore not be subject to Parliamentary scrutiny; and (c) changes to monetary limits which would be subject to the draft affirmative resolution procedure in line with the current position under the Act (see clauses 5(7) and 53(3) of the Bill).
Clause by clause analysis of delegated powers
Agreements regulated under the 1974 Act
Clause 3 – Exemption relating to high net worth debtors and hirers Power conferred on: Secretary of State Power exercisable by: Order made by statutory instrument Parliamentary procedure: Negative resolution
Clause 3 inserts a new section 16A after section 16 of the 1974 Act. Under the new section 16A(1) the Secretary of State may, by order, provide that consumer credit and hire agreements will not be regulated by the Act3 where a person satisfies the formal requirements to be a “high net worth” debtor or hirer. This does not mean that such agreements will be exempted from the provisions relating to unfair relationships. These formal requirements as set out in subsection (1) are that: • the debtor or hirer is a natural person; • the agreement includes a declaration by the debtor or hirer to the effect that he agrees to forgo the protections and remedies that would otherwise be available to him under the Act; and • a statement of high net worth has been made in relation to him; and • that statement is current in relation to the agreement and a copy of it was provided to the creditor or owner before the agreement was made. Subsection (2) defines a statement of high net worth. The statement must show that, in the opinion of the person making it, the natural person in relation to whom it is made had during the previous financial year income or net assets of specified descriptions and of not less than specified amounts. Subsection (3) provides that a person of a specified description must make the statement. Subsection (6) defines “specified” as being specified by order under section 16A. Under section 16A(4) the Secretary of State may make provision in an order under that section about: • how amounts of income and values of net assets are to be determined for the purposes of sub-section 16A(2); and • the form, content and signing of: o statements of high net worth; and o declarations for the purposes of sub-section 16A(1)(b).
3 Paragraphs 13 and 14 of the Explanatory Notes to the Bill summarise how the Act regulates such agreements. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 31
In defining the thresholds for the values of income and assets in the order, the Secretary of State will specify in detail what can and cannot be included in the calculation of the person’s assets and income. In relation to income, we propose that the income figures should be after tax, and in relation to assets we propose to exclude any liabilities, the value of a person’s share in the equity in the principal home and also the value of his pension entitlements. At this stage, we propose that the people who may make statements of high net worth will be professionals whose status is independently verifiable, such as solicitors, accountants and FSA-recognised independent financial advisers. We will, of course, consult with interested parties before the order is made. It is thought that detailed matters such as these are better left to be dealt with in secondary legislation and this will also allow the Secretary of State to keep the detailed requirements of this exemption under review and change them from time to time as necessary to deal with changes in lender practices and consumer behaviour. We believe that a negative resolution is appropriate because this is the procedure applicable under the 1974 Act now in relation to exemption orders under section 16 and to matters such as the prescribing of form and content of documents (see, for example, the existing delegated powers under sections 52, 60 and 105 of the 1974 Act).
Clause 4 – Exemption relating to business Power conferred on: Secretary of State Power exercisable by: Order made by statutory instrument Parliamentary procedure: Negative Resolution
Clause 4 inserts a new section 16B before section 17 of the Act. Section 16B will provide that the Act will not regulate business lending or hiring above £25,000. Sub-section 16B(4) gives the Secretary of State the power to make provision by order about the form, content and signing of declarations to be made by debtors or hirers under section 16B(2). Our reasons for proposing that such matters are left to secondary legislation and that this power should be subject to negative resolution procedure are the same as those set out above in relation to clause 3 in the last two paragraphs.
Clause 5(7) – Consequential amendments relating to ss.1 to 4 Power conferred on: Secretary of State Power exercisable by: Order made by statutory instrument Parliamentary procedure: Draft affirmative resolution procedure
Clause 5(7) amends sections 181(1) and (2) of the 1974 Act to permit the Secretary of State to alter the monetary limit of £25,000 set out in the proposed new section 16B (see clause 4 of the Bill) for the regulation of small business lending and hiring. This replaces the existing power in section 181 for the Secretary of State to alter monetary limits above which agreements for any purpose are not regulated under the 1974 Act currently. That power will no longer be needed in the light of the removal by clause 2 of this Bill of these blanket financial limits. The Government believes that it is necessary to have this power to increase the limit for the regulation of small business lending and hiring from time to time just as it now has the 32 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE power to alter financial limits covering all lending and hiring under the Act. The Government will consult with interested parties before determining whether the circumstances are right to use this power. We propose that secondary legislation made subject to this power be subject to the draft affirmative resolution procedure in recognition of the importance of any change to this limit. It could mean that business lending or hiring agreements above £25,000 begin to be regulated under the Act. It is also consistent with the current position under the Act whereby alterations of monetary limits in the Act by statutory instrument are subject to the draft affirmative resolution procedure (see section 181(2)).
Statements to be provided under regulated credit agreements
Clause 6 – Annual statements for fixed sum credit agreements Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution
Clause 6 will require creditors to provide debtors with an annual statement in relation to a fixed sum credit agreement where the agreement has a duration of more than one year. The Secretary of State may make regulations providing for the form and content of these annual statements. This will enable the Secretary of State to prescribe the required form and content of annual statements in order that they clearly set out information to help consumers regularly access the state of their account. This power allows the Secretary of State to review and adapt the form and content requirements to deal with changes in the market and consumer behaviour as and when required. The Government will consult interested parties on the precise form of the statements. We propose that secondary legislation made subject to this power be subject to the negative resolution procedure because the power is of a technical and procedural nature and is the procedure adopted in the 1974 Act for matters dealing with form and content (see section 60(1)(a)).
Clause 7 – Further provision relating to statements Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution
Clause 7 amends and supplements an existing subordinate power under section 78(4) of the 1974 Act which enables regulations to be made to specify the form and certain prescribed contents of debtor statements relating to running-account credit agreements. The effect of this amendment is to enable the Secretary of State to include in regulations made under section 78(4) information about the consequences to the debtor of: • failing to make payments as required by the agreement, or • only making payments of a prescribed description in prescribed circumstances. The existing section 78(4) is not wide enough in scope to allow for such information to be included in these statements. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 33
The power to include such information in running-account credit statements is intended to provide consumers with information as to the potential consequences of certain conduct under the agreement. The Government proposes that this should include warnings in relation to the potential consequences of making only minimum repayments under the agreement or failing to make required repayments. The Government will consult interested parties on the types of circumstances that would give rise to an obligation to provide a warning in a statement and the form of the required warnings. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is of a technical and procedural nature.
Default under regulated agreements
Clause 8 – Information sheets on arrears and default Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative Resolution
Clause 8 will require creditors to include information sheets prepared by OFT with either a Notice of Default (section 87 of the 1974 Act) or Notice of Sums in Arrears (clauses 9 – 10) given to the debtor or hirer. Under this clause, OFT must prepare and publish the information sheets, but the Secretary of State may make regulations about the information to be included in these OFT information sheets. This will allow the Secretary of State, if necessary, to specify the information to be included in the information sheets to take account of changes to market practices, consumer behaviour, advice provision and legal processes. For this reason the information requirements have not been included on the face of the Bill. We will consult with OFT and other stakeholders about the necessity of such regulations and their content. OFT will determine the design and wording of the information sheets. The OFT must give general notice of the information sheets three months before they are due to take effect. Any subsequent revisions by the OFT will be published and take effect in the same way. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is of a technical and procedural nature.
Clause 9 – Notice of sums in arrears under fixed-sum credit agreements etc. Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution.
Clause 9 will require creditors to provide debtors or hirers with notices about arrears in relation to fixed-sum credit agreements. Under this clause, the Secretary of State may make regulations providing for the form and content of such notices. This will enable the Secretary of State to prescribe the required form and content of notices of sums in arrears to ensure consumers receive clear information about their financial situation when they fall into arrears. 34 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
This allows the Secretary of State to review and adapt the form and content requirements to deal with changes in market practices and consumer behaviour. The Government will consult interested parties on the exact form and content of these. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is of a technical and procedural nature.
Clause 10 – Notice of sums in arrears under running account credit agreements etc. Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution
Clause 9 will require creditors to provide debtors with notices about arrears in relation to running-account credit agreements. Under this clause, the Secretary of State may make regulations providing for the form and content of these notices. This will enable the Secretary of State to prescribe the required form and content of notices to ensure that consumers receive clear information of sums in arrears. It will allow the Secretary of State to review and adapt the form and content requirements to deal with changes in market practices and consumer behaviour. The Government will consult interested parties on the form and content of notices of sums in arrears. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is of a technical and procedural nature.
Clause 12 – Notice of default sums Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution
Clause 12 will require the creditor or owner to provide notices about default sums (being fees and charges applied as a consequence of a breach of the credit agreement) to the debtor or hirer. Sub-section (7) enables the Secretary of State to make regulations providing: • that the section does not apply in relation to a default sum which is less than a prescribed amount; and • for the form and content of notices to ensure debtors or hirers receive clear information, and • in addition, subsection (2) enables the Secretary of State to prescribe the period after the default sum becomes payable within which the notice shall be given to the debtor or hirer. This allows the Secretary of State to review and adapt the various prescribed elements to deal with changes in market practices, inflationary pressures and consumer behaviour as necessary. The Government will consult interested parties on the prescribed amount, timing, form and content of notices for default sums. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is of a technical and procedural nature. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 35
Clause 14 – Default notices Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution
Clause 14 amends section 88 of the 1974 Act, which sets out information that must be included in a Notice of Default that must be served by the creditor if he wishes to enforce a breach by the debtor of a regulated agreement and enables the Secretary of State to prescribe the form. The amendment will enable the Secretary of State to prescribe additional information relating to the agreement to be included in a default notice. The Government’s intention is to amend the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 (SI 1983/1561) to give debtors better information about certain consequences when they have defaulted, for example, about the existence and effect of interest after judgment clauses in their agreements (i.e. a clause that permits the creditor to apply interest at the contractual rate to any judgement sum awarded to the creditor in relation to the credit agreement). This additional power allows the Secretary of State to review and adapt what additional information relating to the agreement may need to be included in default notices to reflect changes in market practices and consumer behaviour. The Government will consult interested parties as to the form and content of such notices and on any additional information to be included in default notices, including information about interest after judgment clauses. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is of a technical and procedural nature.
Clause 17 – Interest payable on judgment debts etc. Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative Resolution
Clause 17 addresses the situation where the credit agreement contains a term enabling interest to accrue after judgment until final payment has been made by the debtor and hirer. In order that debtors or hirers are better informed this clause will impose a requirement on creditors to give notice of such interest after the judgment (called the “first required notice”) and then subsequent notices at intervals of not more than 6 months. Under this clause, the Secretary of State may make regulations about the form and content of such notices, which allows the Secretary of State to review and adapt the form and contents of these Notices to deal with changes in market practices and consumer behaviour. The Government will consult interested parties as to the exact form and content of these notices. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is of a technical and procedural nature. 36 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
Licences and charges
Clause 34 – Definite and indefinite licences Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution
Under Clause 34, the OFT will have the power to issue licences of both indefinite and definite duration. Under Clause 34(2) the Secretary of State has the power to make regulations to specify the maximum duration of a licence with a definite term. This power replaces the power given to the Secretary of State by the existing section 22(1) of the 1974 Act to make regulations specifying the duration of all standard licences. All such licences are currently time limited.
Clause 35(3) – Charges for indefinite licences Power conferred on: Secretary of State Power exercisable by: Regulations made by statutory instrument Parliamentary procedure: Negative resolution
Under Clause 35 the OFT has the power to issue a general notice outlining the periodic charge that holders of an indefinite licence are to pay. OFT will issue general notices from time to time varying the charge payable. New section 28A(3)(B) gives the Secretary of State the power to make Regulations that will make it clear to holders of indefinite licences which charge they have to pay.
Civil Penalties
Clause 53(3) – Further provision relating to civil penalties Power conferred on: Secretary of State Power exercisable by: Order made by statutory instrument Parliamentary procedure: Draft affirmative resolution procedure
Clause 53(3) provides that the Secretary of State may, by order, change the maximum amount of the civil penalty specified in new section 39A(3). This will enable the Secretary of State to alter the amount for example to take account of changes in the consumer credit market and the wider economy. The draft affirmative resolution procedure is proposed civil penalties may be imposed in relation to breaches of the Act with potentially significant impacts on businesses. This approach is also in keeping with the powers conferred on Ministers to alter financial limits under the Act (e.g. the power to increase the limits under section 181 of the 1974 Act).
DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 37
Appeals
Clause 55 – The Consumer Credit Appeals Tribunal Power conferred on: The Lord Chancellor Power exercisable by: The making of Rules Parliamentary procedure: Negative Resolution
Clause 55 inserts a new section 40A after section 40 of the 1974 Act establishing a new tribunal to be known as the Consumer Credit Appeals Tribunal. The new section 40A(3) provides that the Lord Chancellor may by rules make provision as he thinks fit for regulating the conduct and disposal of appeals before the Tribunal and, by virtue of new section 41A(6) inserted by clause 57 of the Bill, for regulating or prescribing any matters incidental to or consequential to appeals under the new section 41A. Currently appeals against OFT licensing decisions under the 1974 Act are made to the Secretary of State for Trade and Industry, who appoints a panel of experts to hear the appeal on her behalf. Section 41(2) of the 1974 Act gives the Secretary of State the power to make regulations regarding the conduct of such appeals. However, the Government’s policy now, as outlined in the July 2004 White Paper “Transforming Public Services: Complaints, Redress and Tribunals”, is to bring together all tribunals in a unified system within the Department for Constitutional Affairs (“DCA”), helping establish common standards for performance and accountability. To reflect this and to bring the system into line with human rights principles to separate the appeals process under the 1974 Act from the Secretary of State by bringing it within the tribunal service of the DCA under the purview of the Lord Chancellor. We propose that the secondary legislation made subject to this power should be subject to the negative resolution procedure so as to be consistent with rules made by the Lord Chancellor relating to other Tribunals (e.g. the Pensions Regulator Tribunal). It would also be consistent with the procedure applicable to regulations regarding the conduct of appeals made under section 41(2) of the 1974 Act now.
Ombudsman Scheme
Clause 59 – Financial services ombudsman scheme to apply to consumer credit licensees Power conferred on: Secretary of State with the approval of HM Treasury Power exercisable by: Order made by statutory instrument Parliamentary procedure: Negative Resolution
Clause 59 inserts a new section 226A into FSMA introducing the new consumer credit jurisdiction. Sub-section 2(e) allows the Secretary of State to make an order specifying the types of business being brought within the consumer credit jurisdiction. This power is necessary to allow for a phasing in of consumer credit cases into the new jurisdiction to ensure that the FOS is not overwhelmed by new cases , given its ongoing responsibilities in relation to its existing jurisdictions. We propose that secondary legislation made subject to this power should be subject to the negative resolution procedure because the power is: • procedural in nature; and 38 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
• is intended to allow the Secretary of State to phase in the types of business subject to the consumer credit jurisdiction on a gradual basis.
Miscellaneous
Clauses 68 Consequential amendments Power conferred on: The Secretary of State Power exercisable by: Order by statutory instrument Parliamentary procedure: Negative Resolution
Clause 68 confers on the Secretary of State the power to make modifications to: • an Act or subordinate legislation (as defined in the Interpretation Act 1978); or • any Northern Ireland legislation or instrument made under such legislation as he thinks fit in consequence of this Act. The power also allows for the making of transitional and transitory provisions and savings in consequence of such modifications. The provision is required to enable the making of amendments to other primary legislation which are necessary as a consequence of the provisions of this Bill and are not already made by this Bill. In some cases, consequential amendments may have to be subject to transitional or transitory arrangements or savings to take account of existing circumstances. As is common for such provisions (see, for example, section 277 Enterprise Act 2002) , it is proposed that any such order be subject to the negative resolution procedure.
Clause 68 – Transitional provision and savings Power conferred on: The Secretary of State Power exercisable by: Order by statutory instrument Parliamentary procedure: None
Clause 69(2) confers on the Secretary of State the power to make such transitional or transitory provisions or savings as he thinks fit in connection with the coming into force of any provision of the Bill. In doing so, the Secretary of State may: • where a provision of the Bill is brought into force for limited purposes only, make further provisions as to how the relevant provisions of Schedule 3 are to apply; • make provision for or in connection with the application of any provision in the Bill in relation to: o things existing or done; o persons who have done something or in relation to whom something has been done, before the coming into force of that provision.
Section 69(4) provides that the Secretary of State may by order: • modify an Act or subordinate legislation (as defined in the Interpretation Act 1978); DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 39
• modify any Northern Ireland legislation or instrument made under such legislation; and • make different provision for different cases. Similar powers are to be found in section 75 of the Competition Act 1998, section 426 of FSMA and section 276 of the Enterprise Act 2002. The power is necessary to ensure that detailed provisions of the Bill can be brought into effect smoothly, without the need for further primary legislation to deal with any transitional, transitory or savings provisions that are not covered directly in the Bill. Schedule 3 contains a number of transitional provisions in relation to the Bill; however it was not possible to detail all of such provisions that might be necessary before detailed consultation on the timing of implementation of the Bill, particularly in relation to the proposed changes made by the Bill to the licensing system In line with the similar powers under other legislation referred to above, no Parliamentary procedure is prescribed for making of an order under this clause.
Clause 71 – Short title, commencement and extent Power conferred on: Secretary of State Power exercisable by: Order made by statutory instrument Parliamentary procedure: None
Clause 71 provides that the Secretary of State may by order appoint a day on which the Act may commence, and that she may appoint different commencement days for different purposes in line with normal practice. As is usual, commencement orders made under clause 70 would not be subject to any parliamentary scrutiny.
Powers conferred on OFT and FOS 7.1 Provisions under which OFT may issue general notices
Clauses 27(1) and 35 – Charges for applications for licences and periodic charges for indefinite licences Clause 27(1) of the Bill inserts a new section 6A after section 6 of the 1974 Act. The new section 6A(2) permits OFT to specify the amount of the charge payable for an application for a licence or its renewal. OFT must do this through the publication of a general notice. New section 6A(4) provides that OFT must obtain the consent of the Secretary of State and HM Treasury for such a general notice. Clause 35 inserts section 28A into the 1974 Act. Section 28A requires the holders of an indefinite standard licence and original applicants for a group licence, to pay the OFT a periodic charge towards the costs of carrying out its functions. The charge must be specified by general notice, which may include different provision for different cases. The licensing system is to be self-funding, with its costs being met from application, renewal and periodic charges collected from consumer credit businesses. These powers, therefore, enable OFT to determine the appropriate level of charges from time to time. OFT may also specify different levels of charges for different cases, e.g. a basic rate for small businesses, with higher charges for businesses with higher levels of turnover. 40 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
OFT can therefore decide on appropriate levels of licence fees, according to resource requirements, but is held accountable by having to obtain the consent of the Secretary of State and the Treasury before imposing charges.
Clause 28 – Applications for standard licences Clause 28 inserts a new section 24A after section 24 of the 1974 Act. The purpose of the new section 24A is to give OFT power to manage the application process in a more efficient way by requiring people to specify in applications for licences what businesses they want the licence to cover. They may require a licence to cover one or more types of business specified in s24A(4) without limitation (a whole category licence) or to cover only one or more descriptions of business within a type of business (a sub-category licence). Clause 24A(5)(a) requires OFT to specify by general notice the descriptions of business which can be set out in an application for a sub category licence. Clause 24A(5)(b) enables OFT to provide by general notice that applications within new section 24A(1)(b), i.e. for sub-category licences, cannot be made in relation to one or more types of credit business listed in subsection 4(c) to (i). This means that OFT is not obliged to specify sub-categories of ancillary credit business.
Clause 36 – Extension of period to make payment for an indefinite licence Clause 36 inserts section 28B after the new section 28A (inserted by clause 35 of the Bill). It will permit OFT to extend the period in which a licence holder must make a payment for an indefinite licence where it is satisfied that there is a good reason why the applicant has not paid the sum prior to making the application and why the applicant cannot pay the sum before the expiry of that period. Sub-section (2) provides that an application for an extension shall be made before such day as may be determined in accordance with provision made by the OFT by general notice. As OFT is responsible for the setting, levying and collection of charges in relation to licences under the Act, it is appropriate that the OFT should determine the terms on which those charges are collected, having regard to the circumstances of individual businesses.
Clause 44 – Provision of information etc. by applicants Clause 44 amends section 6(2) and replaces subsection (3) of the 1974 Act with a new sub-section. These sub-sections deal with the form and process of applications to OFT for a consumer credit licence. Sub-section 6(2) as amended directs that OFT may by general notice specify those documents and that information that an applicant must provide with his application for a licence. The new subsection 6(3) directs that OFT may by notice to the applicant after he has submitted his application to the OFT specify such further information or documents relevant to the application as may be specified or described in the notice. As OFT is responsible for the determination of licensing applications and the administration of the licensing regime under the Act, it is appropriate that the OFT should specify the types of information that it requires to determine an application for a licence under the Act. DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 41
Clause 45 – Duties to notify changes in information etc. Clause 45 inserts a new section 36A after section 36 of the 1974 Act. The new section 36A will require licensees to provide certain information and to notify OFT of certain matters after their licences have been granted. Certain of these matters are, under new section 36A(6), to be specified in a general notice to be published by OFT. The matters OFT may require further information on under section 36A(7) must be relevant to the question of whether the licensee is a fit person to hold the licence. As OFT is responsible for the determination of licensing applications and the administration of the licensing regime under the Act, it is appropriate that the OFT should specify the types of additional information that it may require after a licence has been granted in addition to information provided at the time that the application was made. Given that the additional information may be the same or similar for many licensees, it is appropriate that OFT should specify those types of information by means of a General Notice.
Clause 63 – Disapplication of section 101 of the 1974 Act Under section 101 of the 1974 Act a regulated consumer hire agreement is cancellable by the hirer after an 18-month period. Section 101(8) allows the OFT to direct that individual agreements may be exempted from this provision if it is in the hirers’ interest to do so. The OFT do not consider that it is always necessary for them to approve each agreement individually for an exemption in order to provide adequate protection for hirers. In cases such as the Home Computing Initiative where employers run common schemes, they can identify general criteria that will ensure that agreements under such schemes are in the interests of hirers. As OFT is responsible for the determination of licensing applications and the administration of the licensing regime under the Act, it is appropriate that it should be able to exempt classes of agreement from the application of section 101 of the 1974 Act provided that they meet specified conditions. Therefore, it is appropriate that OFT should specify exempted classes of agreements along with any appropriate conditions by means of General Notice. There is no diminution in consumer protection stemming from the proposed change.
Powers of the Board of the Financial Ombudsman Service
Clause 59 – Financial services ombudsman scheme to apply to consumer credit licensees Clause 59 gives FOS as scheme operator the power to make rules in relation to the consumer credit jurisdiction. FOS will be responsible for both the determination of disputes brought to it for resolution as well as the administration of the jurisdiction. It is therefore appropriate that it should make rules as to the manner in which it will conduct its responsibilities under the consumer credit jurisdiction. The new Schedule 3A to FSMA (inserted by Schedule 2 of the Bill) sets out the procedural steps to be followed in the making of the rules. Any rules made, varied or revoked by FOS are required to be approved by FSA. 42 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
Clause 60 – Funding of ombudsman scheme Clause 60 inserts a new section 234A into FSMA dealing with the funding of the ombudsman scheme. Sub-section (1) allows that the FOS, as the scheme operator, may, from time to time determine the sum to be raised by way of contributions from every licensee who holds a consumer credit licence (being those licensees who are part of the consumer credit jurisdiction) (persons of different descriptions may be required to pay different amounts). FSA must approve any determination made by the FOS under this section and the FOS must notify OFT of any determination made. This power is delegated to the scheme operator as they currently make the procedural rules in relation to their existing jurisdictions and we feel that it is desirable and sensible that this procedure continue. The power to the FSA to approve such rules is also pre- existing.
Clause 61(5) – Consequential amendments relating to ombudsman scheme Clause 61(5) inserts a new sub-section 229(4A) into FSMA allowing the board of the FOS as the scheme operator to specify for the purposes of the consumer credit jurisdiction the maximum amount which may be regarded as fair compensation. Any specification made by the Board of FOS requires the approval of FSA. The rationale for delegating the power to the scheme operator is the same as that for clause 60 above. July 2005 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 43
APPENDIX 3: REGULATION OF FINANCIAL SERVICES (LAND TRANSACTIONS) BILL
Memorandum by HM Treasury
Introduction 1. This Bill, by amending Schedule 2 to the Financial Services and Markets Act 2000 (“FSMA”), extends the existing delegated power in section 22 of FSMA. Schedule 2 to FSMA already covers activities involving loans secured on land. The amendment will enable the Treasury to specify in an order under that section that activities relating to other types of financial arrangement involving the acquisition or disposal of land are to be regulated by the Financial Services Authority (“FSA”). 2. The Bill contains 2 clauses.
Territorial coverage 3. The Bill extends to England and Wales, Scotland and Northern Ireland.
Parliamentary scrutiny 4. The Bill does not provide for new delegated powers but its effect will be to enable the Treasury to specify, in an order made under section 22 of FSMA, additional types of activity which are to be treated as “regulated activities” for the purposes of FSMA. 5. Paragraph 26 of Schedule 2 to FSMA contains provisions which ensure that there is appropriate Parliamentary scrutiny for the exercise of such powers. Paragraph 26 provides for a special affirmative procedure where an order is made under section 22 which contains a statement by the Treasury that in their opinion the effect (or one of the effects) of the proposed order would be that an activity which is not a regulated activity would become a regulated activity. It is intended that at least the first order made as a result of this Bill will contain such a statement. 6. Any other order under section 22 is subject to negative procedure under section 429 of FSMA.
Proposal to make an order 7. The precise nature of the financial arrangements which are to be regulated will be set out in an order that it is proposed will be made by the Treasury once the Bill is passed and comes into force. It is currently intended that the order will specify activities relating to the following home finance schemes: (a) home reversion plans; and (b) Ijara home finance products compliant with Sharia law (which prohibits the payment or receipt of interest on a loan). 8. A home reversion plan is an arrangement whereby a homeowner sells all or part of his residential property at a discounted rate to a financial services supplier in return for a lump sum and/or income and continues to live in the property rent-free for life. 9. An Ijara scheme involves the financial services provider acquiring a residential property and then granting a lease of the property to the customer and, at the end of the term of the lease, selling the property to the customer for the original value. July 2005 44 DELEGATED POWERS AND REGULATORY REFORM COMMITTEE
APPENDIX 4: MERCHANT SHIPPING (POLLUTION) BILL [HL] – GOVERNMENT RESPONSE
Letter from Lord Davies of Oldham, Deputy Chief Whip and Lords spokesman for the Department for Transport, to the Chairman I am writing to inform you of a Government amendment to the Merchant Shipping (Pollution) Bill [HL]. The Delegated Powers and Regulatory Reform Committee’s First Report of this Session (HL Paper 10) reported on the Merchant Shipping (Pollution) Bill and recommended (at paragraph 43) that any subordinate legislation made by a Minister of the Crown pursuant to clause 1(4)(b) of the bill should be made by statutory instrument subject to negative resolution procedure. The Department for Transport has therefore tabled an amendment so that clause 1(4)(b) now provides a power for the Secretary of State to make an order by statutory instrument. A second amendment at clause 1(7) provides that an order made by statutory instrument pursuant to clause 1(4)(b) will be subject to negative procedure. I attach a copy of the amendments for information [not printed]. You may also wish to note that amendment 2 makes a further amendment at clause 1(7) to make it clear that no Parliamentary procedure applies to an Order in Council in respect of a British Possession relating only to the Supplementary Fund Protocol. 7 July 2005
DELEGATED POWERS AND REGULATORY REFORM COMMITTEE 45
APPENDIX 5: CHILDREN AND ADOPTION BILL [HL] –GOVERNMENT RESPONSE
Letter from Lord Adonis, Parliamentary Under Secretary of State for Schools at the Department for Education and Skills, to the Chairman Thank you for the Delegated Powers and Regulatory Reform Committee’s report on the Children and Adoption Bill [HL]. As always, the Committee’s comments are helpful and to the point, and we will take them on board in further shaping this bill. We are grateful that the Second Report of Session 2005–06 draws the House’s attention to the provision in clause 8 of the bill, relating to declarations of special restrictions on adoptions from abroad. The Committee recommended that a declaration under clause 8(4) (and its cancellation under clause 9(2)) should be by statutory instrument subject to the negative resolution procedure. We are happy to accept this recommendation, and will prepare an amendment to put it into effect. I am pleased that we are once again able to put into practice the Committee’s considered advice. 18 July 2005