Select Committee on Trade and Industry Fourth Report


FOURTH REPORT

The Trade and Industry Committee has agreed to the following Report:—

DRAFT LIMITED LIABILITY PARTNERSHIP BILL

I INTRODUCTION

Pre-legislative scrutiny

1. In May 1997, following the Queen's Speech, the Government announced that at least six draft Bills would be published in the course of the first session of Parliament, including a Bill on Limited Liability Partnership (LLP). In July 1997 the Select Committee on Modernisation of the House of Commons in its First Report on the legislative process welcomed the Government's intention to publish draft Bills and recommended that "some or even all" be considered by the House, through an ad hoc select committee, a Joint Committee with the Lords or by "the appropriate departmental select committee".[1] The Select Committee saw such pre-legislative scrutiny as providing an opportunity for the House and for Members "to have a real input into the form of the actual legislation which subsequently emerges", and suggested that it should also lead to better legislation and less likelihood of subsequent amending legislation. The Select Committee noted the advantages of pre-legislative scrutiny being undertaken by departmental select committees, while recognising the additional burden of work which this would involve and that committees might be unwilling to put their other work to one side. Finally, the Select Committee noted that -

    "Given the fairly strict time limits which would inevitably have to apply to pre-legislative scrutiny, departmentally-related committees would need to know well in advance if they were to be charged with such a task so that it could be fitted into their programmes."[2]

Although not formally charged with the task, we decided over a year ago that it would be right to conduct pre-legislative scrutiny of the draft Limited Liability Partnership Bill. If it had not been for the Modernisation Committee's Report, it is unlikely that we would have done so, given the volume of other work of an apparently higher priority to which we were committed. We have in the event found the exercise to have been a useful and constructive one.

Inquiry

2. The DTI published its first consultation paper, together with what were in effect detailed legislative drafts, in February 1997.[3] In May 1997 Ministers confirmed their intention of publishing a draft Bill as soon as possible. In the autumn of 1997 it was understood that a draft Bill would be published early in 1998. As month followed month, the timetable slipped, making it difficult for us to arrange our forward programme. The draft Bill and accompanying draft Regulations were not published until September 1998, with the consultation period due to end in mid-November. We decided to await the end of that second consultation period before hearing evidence, so that witnesses would have had time to reach a considered view on the proposals. On 1 December 1998, two weeks after the end of the consultation period, we held two lengthy oral evidence sessions with DTI officials; the Association of Partnership Practitioners (APP); Mr Roderick Banks, a barrister; the Institute of Chartered Accountants in England and Wales (ICAEW); Professor Sikka of the University of Essex; the Association of Chartered Certified Accountants (ACCA); the Law Society; the Royal Institution of Chartered Surveyors (RICS); the Construction Industry Council (CIC); and the Association of British Insurers. We are grateful to those who gave oral evidence.

3. In addition to those from whom we heard oral evidence, and whose memoranda are printed with that evidence, we have been much assisted by the approximately 200 responses to the DTI's two consultation papers. These responses are all publicly available. Of particular help have been the long and detailed responses to the 1998 paper from a number of large accountancy firms, professional associations and individual experts.[4] We have also been assisted by a number of academic articles, copies of which we have placed in the House of Commons Library for the use of members and their staff during the passage of legislation: and by the facility extended to Committee staff of attendance at an IBC UK conference on LLPs held on 28 January 1999.

Lessons

  4. This exercise has been among the first such conducted this Parliament. In view of the Committee's experience in conducting its recent inquiry into what were in essence also pre-legislative proposals on Strategic Export Controls[5], we have several comments of general application on the process of pre-legislative scrutiny by departmental select committees :

    (a)  It remains unclear how far the House expects to be advised on the principles of a draft Bill as well as on the merits of its detailed provisions. Were a committee to consider the fundamental purpose of a Bill to be flawed — a view propounded by only a few respondents in the case of the LLP Bill — it could hardly be expected to desist from so reporting. We draw attention below to several areas of policy where we express some continuing concerns.

    (b)  The extent to which a select committee can or should be expected to arrive at a definitive view on areas of policy on which Ministers have yet to take a view is also uncertain. The principal outstanding issue on the LLP Bill is whether the status should be available to all or only to regulated professionals. A view expressed by a select committee cannot of course bind the House: nor should it be prayed in aid by Ministers as representing the House's endorsement of a particular view. We have concluded that, since one of the declared purposes of such scrutiny is to provide an opportunity for a parliamentary input before Ministers feel committed to a particular view, it is useful to reach some conclusions on still undecided matters, rather than being restricted to the questions of detail and transposition of policy intent into legislative form.

    (c)  The Report of the Modernisation Committee suggested that pre-legislative scrutiny "could, and indeed should, lead to less time being needed at later stages of the legislative process ..".[6] We consider that a select committee should feel free to give some indication as to the extent of further scrutiny required in the course of the legislative process. From our scrutiny of the legislative proposals on the creation of LLPs, we consider that, while unlikely to be politically controversial, the Bill merits a Second Reading on the floor of the House; that the committee stage can be expected to be reasonably brief; and that the draft Regulations will require further examination by this Committee before being laid, at which point they will require affirmative resolution. Whatever the perceived urgency in getting the Bill onto the statute book, the due process of parliamentary scrutiny must not be artificially abbreviated.

    (d)  While some uncertainty in the timing of publication of draft legislation can be accepted as inevitable, serious consideration must be given to ensuring that timetables are adhered to. If, as we hope, there is more draft legislation in the offing, of greater complexity and controversy, the strictures of the Modernisation Committee in its 1997 Report on the giving of sufficient notice to Committees must be observed, if the work programmes of committees are not to be unacceptably disrupted.

    (e)  Neither of the two DTI papers contained anything approaching a full and considered analysis of the issues addressed by the Bill (see paras 5 and 6 below). If the Government is serious about wanting to give Parliament and its committees a greater and more constructive legislative role, it must ensure that draft Bills are accompanied or preceded by a full description of the policy background, and of options considered, along the lines of a White Paper.

    (f)  The DTI have been most helpful in forwarding promptly copies of responses to their documents. There is however room for a more streamlined process. We recommend that departments include in the paper accompanying a draft Bill an explicit indication to potential respondents to the consultation process that copies of their responses will, unless confidentiality is requested, be made immediately available to the relevant select committee.

    (g)  The sheer number and bulk of responses render their printing prohibitively expensive. Each committee must of course judge for itself how much to print. We have printed the papers of those from whom we heard oral evidence. The Modernisation Committee explicitly anticipated that, based on the experience of the Deregulation Committee, " much of the evidence would be taken in writing". [7] It is essential that Parliament should have ready access to the responses to a draft bill; not least in the process of scrutiny after formal presentation. The traditional means has been to place them in the Library. In order to increase accessibility, we recommend that consideration be given to placing the text of responses to draft legislative proposals on the Internet.



1  HC190 of 1997-98, para 91 Back

2  Ibid, paras 19ff Back

3  URN 97/597 - henceforth "1997" Back

4  The bodies include the Institute of Chartered Secretaries and Administrators (ICSA), the Institute of Chartered Accountants of Scotland (ICAS), the Chartered Institute of Taxation, the London Society of Chartered Accountants (LSCA) and the City of London Law Society.  Back

5  Second Report of 1998-99, HC 65 Back

6  HC190 of 1997-98, para 20 Back

7  ibid Back


 
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Prepared 16 February 1999