The European Union (Withdrawal) Bill gives the government very broad powers to amend UK law to take account of Brexit using statutory instruments or SIs (also known as "secondary" or "delegated legislation"). As has been widely reported, both Opposition and Conservative "remainers" fear that significant changes to the rule book will be made without proper Parliamentary scrutiny.
We spoke to Joel Blackwell of the Hansard Society, which has recently published a major piece of research on delegated legislation (see below).
Interestingly, the Hansard Society report shows that concern over secondary legislation is a long-standing issue which has been brought to the fore by the Brexit debate. Whilst it is sometimes assumed that SIs are only concerned with "minor technical detail", they have in practice been used to lay down substantive rules in relation to, for example, financial markets where billions of pounds are at stake. And even matters of relative "detail" can be highly significant and controversial, as in the case of an SI which imposed substantially increased fees for bringing employment tribunal claims - and which was recently ruled unlawful by the Supreme Court.
Travers Smith: Why should business be concerned about Parliamentary scrutiny of delegated legislation?
Joel Blackwell: On average, over 1000 statutory instruments (SIs) are laid before Parliament each year, many of which have an impact on business (some examples are given at the end of this article). Very few receive any meaningful scrutiny by Parliament, particularly in the House of Commons. The government estimates that withdrawal from the EU will necessitate about 800-1000 SIs to "correct" the statute book – so unless the system is reformed, potentially significant changes of real concern to business and the wider public could be made with little or no oversight by MPs and peers.
Despite a succession of parliamentary reports highlighting serious problems with scrutiny of delegated legislation, successive governments have made little or no effort seriously to engage with the problem.
In 2014 the Hansard Society published the first in-depth study of parliamentary scrutiny of delegated legislation for over 80 years. In that report, The Devil is in the Detail: Parliament and Delegated Legislation, we concluded that the House of Commons scrutiny system was unfit for purpose and in need of wholesale reform. Our new report Taking Back Control for Brexit and Beyond builds on that work and sets out how scrutiny of delegated legislation could be significantly improved, not only in the EU (Withdrawal) Bill but also more widely.
Travers Smith: What are the main problems with the existing procedures for scrutinising delegated legislation?
Joel Blackwell: The scrutiny process for delegated legislation has become so complex that most MPs simply don’t understand it. And the procedures - particularly those for "praying against" SIs which would otherwise come into force without a vote (so-called "negative instruments" which account for about 75% - 80% of all delegated legislation) – are weak. Many of the MPs we interviewed for The Devil is in the Detail simply weren’t aware of the practicalities relating to the scrutiny of statutory instruments. They did not know that they could table a motion against a negative instrument using an Early Day Motion (EDM) - and when they realised, they were bemused, for EDMs are widely regarded by MPs as a waste of time and money. And a number of the MPs we spoke to confirmed that their party whips had told them that it was perfectly acceptable – indeed preferable – to get on with their constituency correspondence during a Delegated legislation Committee meeting.
Travers Smith: Why has the government included such broad powers to make delegated legislation in the European Union (Withdrawal) Bill?
The powers set out in the Bill are some of the broadest constitutionally important provisions ever seen in legislation. Clauses 7 (correcting power), 8 (compliance with international obligations power) and 9 (implementation power) are very broad "Henry VIII" clauses; if passed, they will confer on ministers extraordinary power to amend, repeal or replace elements of our statute book. Clause 9 even provides a power to enable ministers to modify the future EU (Withdrawal) Act itself.
But Brexit imposes a requirement for speed and flexibility. The combination of a tight deadline (29 March 2019) and protracted uncertainty over the content, timing and sequencing of negotiations and any resulting agreements makes it unavoidable that considerable delegated legislation will be needed. Given the uncertainties of Brexit, the government has to seek the powers to make legislative changes the scope and timing of which it cannot fully know at the time the powers are sought and granted.
The overarching challenge facing Parliament is the conjunction of the wide powers in the EU (Withdrawal) Bill, including controversial Henry VIII powers, with inadequate scrutiny procedures for the ways these powers might be exercised.
Travers Smith: How might the Bill be amended to allow for greater Parliamentary scrutiny of delegated legislation?
Joel Blackwell: In previous bills which included powers of similar breadth and scope to those in the EU (Withdrawal) Bill, Parliament (particularly the House of Lords) has made the exercise of those powers subject to a strengthened scrutiny procedure (i.e. not the normal negative or affirmative procedure). The EU (Withdrawal) Bill proposes no such procedure.
For reasons set out in our new report, Taking Back Control for Brexit and Beyond, none of the existing 11 strengthened scrutiny procedures will meet the Brexit need for legislative speed and flexibility, if the government is to deliver a functioning statute book the day after we leave the EU.
In view of this, the Hansard Society has proposed that a new, bespoke, EU (Withdrawal) Order strengthened scrutiny procedure should be introduced for the exercise of the widest delegated powers. The key feature of the procedure is that Parliament, not the government, will decide how the exercise of the broadest powers in the Bill will be scrutinised.
Travers Smith: Won't greater Parliamentary scrutiny create a risk that changes to the law which need to be in place before Brexit can't actually be made on time?
Joel Blackwell: In designing a new strengthened scrutiny procedure, we have sought to draw on the best aspects of the 11 existing variants, whilst being cognisant of the volume, time and capacity constraints that must be taken into account when considering the Bill. Our procedure retains the top-level architecture of the present delegated legislation system and the standard 28- and 40-day scrutiny periods for SIs, addressing government concerns about time and speed as regards the majority of SIs – whilst allowing those SIs requiring greater scrutiny (which we would expect to be in the minority) to be identified via a "sifting" process and then debated and voted on by Parliament.
Travers Smith: What else does your report recommend?
Joel Blackwell: Better scrutiny should be a permanent feature of parliamentary life, not just for Brexit. The political salience of Brexit-related legislation, and the ‘take back control’ rhetoric surrounding it, now finally and fatally expose the shortcomings of the Commons’ current delegated legislation scrutiny system. As a result, the Hansard Society is also proposing that a new Delegated Legislation Scrutiny Committee should be established in the House of Commons for the scrutiny of all delegated legislation, including that made under the EU (Withdrawal) Bill and other Brexit bills.
The new system would be in the control of MPs not whips, with the chair and members elected in the same way as other select committees and supported by a set of thematic sub-committees, some of whose members would also be members of relevant departmental select committees – thereby building links to MPs with relevant policy knowledge and expertise. It would sift and scrutinise all SIs, including those subject to strengthened scrutiny procedures; those SIs of concern would be turned over to the whole House for further consideration, with procedures in place to ensure that any such SI would have to be debated and voted on.
The Hansard Society's report on delegated legislation, entitled "Taking Back Control for Brexit and Beyond", can be accessed here.
How SIs affect business: some examples
Many SIs are concerned with matters of technical detail – but such matters can often have a significant impact. Examples include:
- Fees: fees payable by business to the Competition and Markets Authority for scrutinising mergers (which can be up to £160,000 per transaction) are set by SI. Fees for bringing proceedings in Employment Tribunals (of over £1000 in many cases) were also introduced by SI (although they have recently been struck down by the Supreme Court).
- Tax and social security: the technical detail of many aspects of the UK's tax and social security system is set out in SIs, which may in some cases have substantial financial implications.
- Consumer credit: similarly, the technical detail of much of the UK's consumer credit regime is laid down in SIs, including the formalities that lenders have to comply with. Failure to comply with such technicalities can have very serious consequences e.g. large numbers of loans could be unenforceable.
All of the above are examples of SIs made under UK primary legislation. SIs are also frequently used to implement EU Directives with major implications for business. For example, the Payment Services Regulations 2017 implemented a 2015 EU Directive which significantly modified the regulatory regime for the UK's £75 trillion payment systems industry. It is also the case that, as a result in part of their technical complexity, issues of immense importance to the integrity and stability of the financial markets are governed by secondary legislation, such as the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 and the Financial Collateral Arrangements (No 2) Regulations 2003.