PART 2: REGULATORS

Exercise of regulatory functions

Section 21: Principles

114.     This section sets out principles to which a person must have regard when exercising certain regulatory functions (as defined in section 32). The principles listed are the Better Regulation Commission's Principles of Good Regulation, and provide that regulatory activities should be carried out in a way which is transparent, accountable, proportionate, consistent, and should be targeted only at cases in which action is needed.

115.     The duty to have regard to these principles is subject to any other legal requirement, such as a statutory duty or a requirement of EC law, which will take priority over the duty to have regard to the principles: subsection (3).

116.     The regulatory functions to which the duty in the section applies are those specified in an order made under the powers in section 24. Those powers are flexible enough to permit an order to specify some regulatory functions of a particular body but not others, if it is considered appropriate for the duty to have regard to the principles to apply in relation to some but not all of its regulatory functions.

Section 22: Code of Practice

117.     This section enables a Minister of the Crown to issue and revise a Code of Practice relating to the exercise of regulatory functions.

118.     Under subsection (2) any person exercising a regulatory function to which the section applies must have regard to the Code when determining general policies or principles by reference to which that person exercises those functions. So the duty to have regard to the Code in subsection (2) does not apply when the regulatory function itself is exercised.

119.     However, under subsection (3), where a person exercises a regulatory function of setting standards or giving general guidance about the exercise of other regulatory functions (whether his own or someone else's regulatory functions), the duty to have regard to the Code applies directly to the exercise of that function of setting standards or giving general guidance. In this case, the duty under subsection (2) does not apply.

120.     The duties to have regard to the Code in subsections (2) and (3) are subject to any other legal requirement affecting the exercise of the regulatory function: subsection (4).

121.     The functions to which the section applies are those specified by order under section 24. An order under section 24 can specify some of the regulatory functions of a particular body, if it was thought appropriate for the duty to have regard to the Code to apply in relation to some but not all of its functions.

Section 23: Code of Practice: procedure

122.     This section sets out the procedure which the Minister must follow when he proposes to issue or revise a Code of Practice.

123.     Subsection (2) requires the Minister, when preparing the draft Code, to seek to secure that it is consistent with the principles set out in section 21. This is to avoid discrepancies between the principles and the Code, which could cause difficulties for regulators who are under a duty to have regard to both.

124.     The Minister must consult the persons listed in subsection (3) about the draft Code. The draft Code must be laid before Parliament and can be issued by the Minister if it is approved by a resolution of each House of Parliament. While the Code is not itself a statutory instrument, it must be brought into force by a statutory instrument as set out in subsection (6). (The statutory instrument is not subject to any procedural requirements.)

Section 24: Functions to which sections 21 and 22 apply

125.     This section makes provision for orders to specify the regulatory functions to which the duties in sections 21 and 22 apply.

126.     Under subsection (2) a Minister of the Crown can specify functions, subject to subsections (3) and (5).

127.     Subsection (3) places restrictions on the extent to which orders can specify regulatory functions exercisable in Scotland, Northern Ireland or Wales. The power to specify a function exercisable only in or as regards to Wales is given exclusively to the National Assembly for Wales, subject to subsection (5).

128.     By virtue of subsection (5), an order under this section cannot specify the regulatory functions of the Gas and Electricity Markets Authority (Ofgem), the Office of Communications (Ofcom), the Office of Rail Regulation (ORR), the Postal Services Commission (PostComm), or the Water Services Regulation Authority (Ofwat).

129.     The authority making an order under this section (whether that authority is a Minister of the Crown or the Assembly) must consult in accordance with subsection (6).

130.     Subsection (7) provides that different provision can be made for different purposes, which will enable an order made under this section to specify a regulatory function for the purpose of section 21 but not section 22, and vice versa.

131.     Under subsection (9) a Minister of the Crown may not make an order unless a statutory instrument containing it is laid in draft before, and approved by resolution of, each House of Parliament. (This provision does not apply where an order is made by the Assembly, rather than a Minister.)

PART 3: LEGISLATION RELATING TO THE EUROPEAN COMMUNITIES ETC

Interpretation of legislation

Section 25: References to Community instruments

132.     This section makes provision about domestic legislation which refers to Community instruments - that is, to legal instruments (such as directives or regulations) which are issued by the European Economic Community, the European Coal and Steel Community or Euratom. The section is designed to make the drafting of domestic instruments simpler. The problem that the section addresses is that currently, when domestic legislation refers to a Community instrument which has been amended or applied by other Community instruments, it is necessary to specify all the instruments which have amended or applied it. That can make for very long references.

133.     Subsection (1) inserts a new section 20A into the 1978 Act. The effect of the new section is that, where an Act refers to a Community instrument, the reference is to be taken, unless the contrary intention appears, as a reference to that instrument as amended, extended or applied at the date of passing of the Act.

134.     The new section only applies in relation to Acts passed after the commencement of the new section on 8^th January 2007. Subsection (2) contains a consequential amendment to section 22 of the 1978 Act.

135.     By virtue of section 23 of the 1978 Act, the new section will also apply to subordinate legislation, within the meaning of that section, made after the commencement of the new section on 8^th January 2007.

136.     Subsection (3) of the section contains an amendment to section 24 of the 1978 Act, so that the new section 20A applies to Northern Ireland legislation as it applies to Acts.

137.     Subsection (4) amends the Scotland Act 1998 (Transitory and Transitional Provisions) (Publication and Interpretation etc of Acts of the Scottish Parliament) Order 1999 (S.I. 1999/1379) to secure the same result for Acts of the Scottish Parliament.

Section 26: EEA agreement and EEA state

138.     The EEA agreement is an agreement between the European Economic Community, the European Coal and Steel Community, their Member States and the members of the European Free Trade Association (EFTA), the purpose of which is "to promote a continuous and balanced strengthening of trade and economic relations .. with a view to creating a homogeneous European Economic Area".

139.     References to an "EEA State" are made frequently in both primary and subordinate legislation, requiring the inclusion of a definition on each occasion. This section introduces standard definitions to avoid having to do this. Subsection (1) inserts definitions of "EEA agreement" and "EEA state" into the 1978 Act. These definitions will apply to all Acts passed after the coming into force of the Legislative and Regulatory Reform Act 2006 on 8^th January 2007. By virtue of section 23 of the 1978 Act, the definitions will also apply to all subordinate legislation, within the meaning of that section, made after the coming into force of the Legislative and Regulatory Reform Act 2006.

140.     Subsection (2) amends section 24 of the 1978 Act to apply the same definitions to Northern Ireland legislation, within the meaning of that section.

141.     Subsection (3) amends the Scotland Act 1998 (Transitory and Transitional Provisions) (Publication and Interpretation etc of Acts of the Scottish Parliament) Order 1999 to secure the same result for Acts of the Scottish Parliament. Subsection (4) provides that the amendment only applies to Acts of the Scottish Parliament passed (and Scottish subordinate legislation made) after commencement of the new provision.

Implementation of Community obligations etc

Section 27: Power to make orders, rules and schemes

142.     Section 2(2) of the 1972 Act enables the implementation of Community law which is not automatically part of UK law. The existing powers allow for implementation by regulations but do not allow for the making of orders, rules or schemes, and this section is designed to allow section 2(2) to be used in combination with delegated powers in other legislation which enable the making of orders, rules or schemes. So section 27 makes amendments to the 1972 Act and other enactments, so as to enable the power to make subordinate instruments under section 2(2) of the 1972 Act to be exercised not only by making regulations but also by making an order, rules or a scheme.

143.     Subsections (3) and (4) make consequential amendments to section 29 of the Government of Wales Act 1998 and Schedule 8 to the Scotland Act 1998.

144.     Subsection (5) enables a Minister to make an order or regulations to amend any enactment or subordinate instrument which refers to regulations under section 2(2) of the 1972 Act so that it also includes a reference to any order, rules or scheme made under that section. (Certain of the terms used in subsection (5) are defined in subsection (9).)

145.     Subsection (6) enables the devolved administrations to make similar provision.

146.     The procedure for exercising this power is set out in subsections (7) and (8). The power is exercisable by statutory instrument (so far as exercisable by a Minister of the Crown, the Scottish Ministers or the Assembly) and, where exercisable by a Northern Ireland department, by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979.

Section 28: Power to make ambulatory references to Community instruments

147.     Section 28 inserts a new paragraph 1A into Schedule 2 to the 1972 Act. It enables any "subordinate legislation" (as defined by the new paragraph) which is made for a purpose mentioned in section 2(2) of the 1972 Act, to provide expressly that any reference in that legislation to a Community instrument is to be construed as a reference to the Community instrument in question as amended from time to time. (The definition of "subordinate legislation" in the new paragraph 1A(2) is not restricted to instruments made under section 2(2) of the 1972 Act; it also includes instruments made under other Acts, Acts of the Scottish Parliament or Northern Ireland legislation.) Such provision can only be made where it appears to the person making the legislation that it is necessary or expedient for references to Community instruments in the legislation he is making to have that ambulatory meaning.

148.     The reason for this amendment is that it might otherwise be thought that such ambulatory references could not be made under the powers conferred by section 2(2) of the 1972 Act. An example of when this power might be useful is where a Community instrument contains lists or tables of technical detail which might be the subject of frequent updating or amendment. A person making legislation which refers to such an instrument could make use of this power in order to avoid the need for the legislation to have to be amended regularly in the future simply to reflect the updating of the Community instrument.

149.     It is worth noting the relationship between this provision and the provision made by section 25. Where subordinate legislation refers to a Community instrument, the 1978 Act, as amended by section 25, will operate as described above so that the reference is taken as a reference to the Community instrument as amended up to that date. But the provision made by section 25 does not allow for the reference to be taken as including the instrument as amended after that date. Paragraph 1A makes provision for this.

Section 29: Combination of powers

150.     Section 29 makes provision to enable the power conferred by section 2(2) of the 1972 Act (power to implement Community obligations etc) to be combined with delegated powers in other legislation where the procedures in each case are different.

151.     It is generally not possible for a statutory instrument made under an enabling power in one Act to be combined with an instrument made under an enabling power in another, if the Parliamentary procedures to be followed under the two Acts differ. Sometimes it is desired to exercise the power in section 2(2) together with another power to create a single new regime. If the powers are subject to different procedures, it may not be possible to do so in a single instrument. It is this difficulty which is addressed by the section.

152.     The Parliamentary procedures which apply to instruments made under section 2(2) of the 1972 Act are set out in paragraph 2 of Schedule 2 to that Act. That paragraph permits a choice of procedure: negative or affirmative.

153.     New paragraph 2A allows for instruments which are made under section 2(2) and are subject to the affirmative procedure to be combined with instruments which would otherwise be subject to the negative resolution procedure or other less onerous procedures. In each case, the provision made under the non-section 2(2) power will be subject to the affirmative resolution procedure, rather than the less onerous procedures which would otherwise apply.

154.     New paragraph 2B deals with the case where the negative resolution procedure is the one to be followed for the provision to be made under section 2(2) of the 1972 Act. The statutory instrument containing the provision to be made under section 2(2) of the 1972 Act can also contain provision which would otherwise have to be laid before Parliament after being made, but would not be subject to annulment nor have to be approved; or would not be required to be laid before Parliament. In this case, the provision made under the non-section 2(2) power will be subject to the negative resolution procedure rather than the less onerous procedure which would otherwise apply.

155.     New paragraph 2C makes the modifications needed so that Scottish statutory instruments can also contain provision made under section 2(2) of the 1972 Act and under other delegated powers in other legislation even though the procedures to be followed under section 2(2) differs from the procedure required by the other legislation.

PART 4: SUPPLEMENTARY AND GENERAL

Supplementary

Section 30: Repeals and savings

156.     Subsection (1) gives effect to the repeals set out in the Schedule to the Act.

157.     The remainder of this section provides that, despite the repeal of the 2001 Act, some of its provisions are carried over for certain purposes. Subsection (2) provides that, if a draft RRO has been laid under section 6(1) of the 2001 Act before the day on which this Act comes into force, then that Act will continue to apply to that order. The order may continue to be made as a RRO under the 2001 Act, notwithstanding that Act's repeal.

158.     Subsection (3) provides that even though the 2001 Act is repealed by this Act, any RROs which have been made under the power in that Act (either before the day this Act comes into force, or after that day if the order is made by virtue of subsection (2) of this section) are not affected and continue in force.

159.     Subsection (4) provides that the repeal of the 2001 Act does not affect the ability of a Minister to make a subordinate provisions order under section 1 of that Act, pursuant to section 4(4) of that Act. This is to ensure that provisions in a RRO made under the 2001 Act which were designated as 'subordinate' in accordance with section 4(3) of that Act can continue to be amended using the procedure provided by that Act.

160.     Subsection (5) provides that the repeal of the 2001 Act does not affect the continuation in force of any order which was made under the power in the Deregulation and Contracting Out Act 1994, provided that it continued in force by virtue of section 12(4) of the 2001 Act immediately before this Act comes into force.

Section 31: Consequential amendments

161.     Subsection (1) amends section 6(7) of the Deregulation and Contracting Out Act 1994 ('the 1994 Act'). Section 6(7) of the 1994 Act defined "enforcement action" by reference to section 9 of the 2001 Act. As a consequence of the repeal of section 9 of the 2001 Act, subsection (1) substitutes the definition of "enforcement action" which was in section 9 of the 2001 Act into section 6(7) of the 1994 Act.

162.     Subsections (2) and (3) amend respectively section 100 of the Local Government Act 2003 and article 17 of the Deregulation and Contracting Out (Northern Ireland) Order 1996. In each case a reference to section 1 of the 2001 Act is replaced by a reference to section 1 or 2 of this Act.

General

Section 32: General interpretation

163.     This section defines terms used throughout the Act.

164.     Of particular note is the definition of "regulatory function" in subsection (2). This definition applies to the term as it appears in Parts 1 and 2 of the Act.

165.     The Act does not attempt to define a "regulator", but rather provides a broad definition of the functions carried out by such persons or bodies. Functions falling within the definition might be exercised by a wide range of bodies including Government departments, local authorities and independent statutory regulators. The first limb of the definition (subsection (2)(a)) is aimed at functions of 'regulating' (for example by producing rules, or imposing requirements, which apply to a category of persons). The second limb (subsection (2)(b)) covers functions of enforcing or securing compliance with such regulation. A regulatory function of making rules or regulations falling within the first limb could be exercised by a different person than the corresponding regulatory function (falling within the second limb of the definition) of securing compliance with or enforcing those rules or regulations.

166.     Only functions that fall within this definition may be the subject of an order made under section 2, or may be included in an order made by a Minister (or the Assembly) under section 24. Orders made under section 1 can only reduce or remove burdens which only affect Ministers or Government Departments where they affect the exercise of regulatory functions.

167.     Subsection (3)(b) states that the definition of 'regulatory function' does not include any functions exercisable by one of the bodies of the Church of England or by a person holding office in the Church of England, which would otherwise fall within the definition.

168.     Subsection (3)(b)(ii) expressly excludes from the definition of regulatory function the function of conducting criminal or civil proceedings. However, this would not exclude the making of a decision to instigate such proceedings.

169.     The provision in subsection (4) makes clear that the definition in subsection (2) of regulatory function includes regulation of the activities of providing goods or services, and employing or offering employment to any person.

Section 34: Extent

170.     Subsection (1) provides that an order under Part 1 which amends or repeals any enactment extending outside England and Wales, Scotland and Northern Ireland may have the same extent as the enactment. So, for example, an order under Part 1 which amends an Act of Parliament which extends to the Channel Islands and the Isle of Man can have the same extent as that Act.

HANSARD REFERENCES

171.     The following table sets out the dates and Hansard references for each stage of this Act's passage through Parliament.