The House of Lords' recent rejection of the Government's controversial statutory instrument on tax credits, which effectively killed the proposed tax credit changes (at least for the time being), raised questions as to whether the upper chamber was usurping the primacy of the House of Commons and acting contrary to the parliamentary conventions in respect of the use of its powers.

This led to the Government commissioning Lord Strathclyde, a Conservative politician, to undertake a review of the parliamentary procedure in relation to statutory instruments. He was asked to consider how greater certainty and clarity could be brought to the procedure for the purposes of ensuring that the House of Commons has the decisive role in secondary legislation.

Lord Strathclyde reported on his review just before Christmas 2015. The report outlines three possible options for meeting the Government's stated aim and makes a recommendation in respect of one of them, together with recommendations on related matters.

Background

On 26 October 2015, the House of Lords passed two separate motions in respect of the draft statutory instrument on tax credits - the Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015 (the Tax Credits SI).

These votes were not to reject the statutory instrument outright, but to refuse to consider it unless the proposed cuts to tax credits were delayed for at least three years and the Government had responded to the analysis of the impact of the cuts undertaken by the Institute for Fiscal Studies.

Although not an outright rejection of the Tax Credits SI, the political effect was the same. The Government was defeated in getting the statutory instrument approved by the House of Lords, which led to publicly-expressed consternation on the part of ministers that the unelected chamber should block legislation that had been passed by the House of Commons. This, it was said, was in breach of the parliamentary convention that it should not do so, or should do so only rarely.

In fact, the House of Lords has 'rejected' secondary legislation on only five occasions (including this one) since the Second World War, so one might be forgiven for thinking that it has 'only rarely' done so and therefore that no convention had really been breached.

However, the concerns were heightened in this particular case because -

  • the following day another Government defeat on a different statutory instrument (the Electoral Registration and Administration Act 2013 (Transitional Provisions) Order 2015) was only narrowly avoided, which led to suggestions that the veto would be exercised in many more instances going forward; and
  • the Tax Credits SI was considered by the Government to be dealing with financial matters and therefore the House of Lords had also ignored the parliamentary convention that it does not seek to challenge the primacy of the House of Commons on financial measures.

There is some debate whether the Tax Credits SI was in fact a financial measure. The Government's position, however, was made clear by George Osborne (the Chancellor of the Exchequer). Speaking at Treasury Questions, on 27 October 2015, he said that "unelected Labour and Liberal Democrat peers" had "voted down the financial measure on tax credits approved by this elected House of Commons" and that this "raises clear constitutional issues that we will deal with".

The Government's response was to appoint Lord Strathclyde to lead a review into how to secure the decisive role of the elected House of Commons in the passage of legislation.

The purpose of the review was stated as being "to examine how to protect the ability of elected Governments to secure their business in Parliament in light of the conventions that the House of Lords does not (i) seek to challenge the primacy of the House of Commons on spending and taxation, and (ii) reject statutory instruments, save in exceptional circumstances".

The aim was for Lord Strathclyde to submit his recommendations by the end of the year, which he duly did.

House of Lords Role - Primary Legislation v Secondary Legislation

The role of the House of Lords differs as between primary legislation and secondary legislation.

In the case of primary legislation, while the House of Lords is able to propose and agree amendments to, and/or disagree with, the proposed legislation, it has no absolute veto on the proposals becoming law. Its ultimate role in this respect is to submit the legislation back to the House of Commons for it to think again, and while it may be possible for it to do this on more than one occasion in respect of the same legislation, the will of the elected House of Commons will ultimately prevail (through the use of the Parliament Acts 1911 and 1949 if necessary).

The Parliament Acts assert the primacy of the House of Commons in respect of primary legislation. They do not, however, apply to secondary legislation. The process for statutory instruments is different.

The level of scrutiny and the extent of the House of Lords' role are both determined by the parliamentary procedure which applies to each statutory instrument in accordance with its enabling legislation.

The specifics are complex. Some statutory instruments need to be laid before each House in draft but not made until the parliamentary procedure is complete. Others can be made and then laid before each House but will not come to info effect until approved (whether by express approval or because after a specified period they have not been annulled). Still others can be laid and come into effect immediately on laying, but will cease to be in force if not approved within the applicable period.

There are two main forms of parliamentary procedure for statutory instruments - the 'negative resolution' procedure and the 'affirmative resolution' procedure. A statutory instrument subject to the negative resolution procedure does not have effect (or if already made ceases to have effect) if either House passes a motion within a specified time (normally 40 days) to annul it. If no such motion is passed the instrument is made (or continues to have effect). On the other hand, a statutory instrument subject to the affirmative resolution procedure cannot generally be made until a draft of it has been positively approved by each House.

However, there are some types of statutory instruments in respect of which the parliamentary procedure is restricted to the House of Commons only, i.e. the instrument is only to be laid before and considered (whether by way of negative or affirmative resolution) by the elected chamber and not by the House of Lords. Generally-speaking, this Commons-only procedure will be adopted for statutory instruments that deal with financial matters.

Where the House of Lords does have a role, its powers are limited to approving or withholding approval (in the case of affirmative resolution procedure) or disapproving (in the case of negative resolution procedure). Where it withholds approval that is the end of the matter and the legislation is not made (unless it is reintroduced in modified form and approved accordingly). The Tax Credits SI was subject to the affirmative resolution procedure and was not approved by the House of Lords.

Parliamentary Conventions - Statutory Instruments

Parliamentary conventions have no legal status but reflect an understanding that the House of Commons (as the elected body) has primacy over the House of Lords (an unelected body) and thereby set out certain parameters of the relationship between the two Houses of Parliament.

Statutory instruments are the principal (but not only) form in which secondary legislation is made. They can (and frequently do) provide the detailed rules in respect of many of the broad provisions that are found in the enabling Acts of Parliament.

The parliamentary convention relating to statutory instruments is that the House of Lords should not reject them (or should do so only rarely).

It is understood that the exercise of such a veto is a significant power conferred on the House of Lords - hence the convention that it should be exercised only in exceptional circumstances.

The Report

Lord Strathclyde's report was published on 17 December 2015 - therefore well within the timetable set by the Government for it to be published by the end of the year - and focuses on the statutory instrument procedure.

It presents three options for providing the House of Commons with a decisive role in secondary legislation and statutory instruments.

The options are -

  • Option 1: To remove the present role of the House of Lords from the statutory instrument review procedure.

This is the extreme option, as it would remove the House of Lords from the formal parts of the statutory procedure altogether, and is most likely to receive very strong resistance if taken forward.

The House of Lords plays a significant and important role in the scrutiny of secondary legislation, particularly through the Joint Committee on Statutory Instruments and the House of Lords Secondary Legislation Scrutiny Committee. Taking away the role of the House of Lords would result in considerably less detailed scrutiny of secondary legislation and, as the report acknowledges, would be detrimental to the quality of legislation generally.

In addition, it would need primary legislation to implement this option for instruments being made under existing Acts of Parliament. For new Acts it is likely to result in the House of Lords pressing for much more of the detail to be set out within the Bill so that it can continue to have a greater say on the matter.

  • Option 2: To retain the present role of the House of Lords but for the upper chamber to clarify, in a resolution or in standing orders, the restrictions on how its powers to withhold approval should be exercised in practice.

This option would not really change the status quo but give it some clarity and put it on a stronger foothold. From a legal perspective it would the easiest of the three options to put in place as it does not require new legislation, but from a political and practical perspective it may be difficult for the House of Lords to agree a solution to the qualification of its powers.

The report notes that it is doubtful whether such a solution can be devised. This is particularly so given that there is no real consensus on the scope of the parliamentary convention and the circumstances in which the House of Lords can or should be able to exercise the veto.

  • Option 3: To create a new procedure (set out in statute) which would provide for the House of Lords to invite the House of Commons to think again in the case of disagreement from the House of Lords, but with the final say on the matter given to the House of Commons.

This is the recommended option. It would enable the House of Lords to continue to scrutinise, debate and vote on secondary legislation, but would also enable the House of Commons to override any 'rejection' by the House of Lords. In this respect it would bring the House of Lords powers over secondary legislation into line with those for primary legislation.

The review by Lord Strathclyde is not the first time that the House of Lords' role in relation to secondary legislation has been considered.

The Royal Commission on the Reform of the House of Lords (chaired by Lord Wakeham) considered the issue in 2000 and made recommendations for change in its report entitled A House for the Future (the Wakeham Report). And in 2010 the Leader of the House of Lords appointed a group, chaired by Lord Goodlad, to 'consider the working practices of the House and the operation of self-regulation; and to make recommendations'. Chapter 3 of the Report of the Leader's Group on Working Practices, published in 2011, refers to the scrutiny of legislation and made recommendations in respect of secondary legislation.

Option 3 (as recommended by Lord Strathclyde) is similar to the model proposed in the Wakeham Report, but unlike that report does not suggest the imposition of a time period within which any subsequent approval by the House of Commons to override the House of Lords' vote would need to be given.

Implementing this option would also need primary legislation, and a number of matters, (including, for example, whether - and if so how - the House of Commons should give reasons for any overriding of the House of Lords' decision) will need to be resolved before it is taken forward.

Financial Privilege

The report confirms that there is nothing within the parliamentary convention or its use which justifies an argument that it does not apply (or should be regarded as irrelevant) to statutory instruments, and appears to support the Government's position that the Tax Credits SI was a financial measure and therefore its 'rejection' breached the parliamentary convention relating to Commons financial privilege.

The question is asked whether any additional provision needs to be made for statutory instruments that attract the parliamentary convention relating to financial matters. The answer seems to be that specific changes are not required given that statutory instruments can be subject to the Commons-only procedure and given that this procedure is generally adopted for those instruments containing financial measures.

Nonetheless, it is proposed that the Government should undertake a review to consider the circumstances in which statutory instruments should be subject to the Commons-only procedure, particularly with regard to financial matters, so that the appropriate principles can be applied with greater consistency in the enabling primary legislation.

Commentary

As might be expected, the report has received a mixed reaction.

The Government described it as both 'thoughtful and measured' and said that it will consider the recommendations and listen to the views of Parliamentarians before deciding its preferred approach.

Given that it has also confirmed (through a statement given to the House of Lords by Baroness Stowell of Beeston) that any new approach would need to ensure that the House of Lords continued to provide scrutiny and challenge to the Government while also ensuring that the House of Commons had the final say, it would seem highly likely that Option 3 (or some variant of it) will be taken forward.

The Opposition believes that the recommended option would be a 'very significant change' and that it would be a 'major departure to use legislation to address the issue'. It is also concerned about the dilution in the level of scrutiny that statutory instruments receive in the House of Commons.

At the very least it is clear, since there is no general agreement or consensus on what constitutes 'exceptional circumstances' for the purposes of the parliamentary convention relating to statutory instruments, that greater clarity is required on the scope and use of this convention if it is to continue to apply in its current form.

While there have been only five occasions since the Second World War on which the House of Lords has voted down secondary legislation, four of them have arisen since 2000. This might suggest that the upper chamber has been getting bolder in its use of this power, or may simply be a statistical reflection of the increase in the number of statutory instruments now used for important legislative purposes. In either case, there is every reason to think that the issue is not going to go away.

It is of course possible to feel sceptical about the expressions of consternation emanating from the present Government. For much of its existence, the House of Lords, with its sizeable constituency of mainly Conservative hereditary peers, was seen as a block on other parties in the elected chamber. The Parliament Act 1911 famously derived from one such conflict between the Lords and the Commons. The current configuration of the House of Lords, with its inbuilt Labour-Lib Dem bias in stark contrast to the make-up of the House of Commons, is an historical anomaly.

Representation could not easily be aligned across the two Houses, so as to ensure that the political composition of the Lords matched that of the House of Commons, without making up a substantial number of new Conservative (and Scottish Nationalist) peers. This would swell the bloated ranks of the upper chamber, already widely considered to be problematic, since it is presently (by number of members) the second largest national legislative assembly in the world. In this respect, the issue is to some extent a subset of the vexed question of wider House of Lords reform, from which the Coalition Government, to the anger of its Liberal Democrat members, ultimately shied away during the last Parliament.

In any event, on the basis that any change will need to be implemented through primary legislation, whatever solution is chosen will not necessarily involve a quick and easy ride for the Government. The implementing primary legislation will need to proceed through both Houses and will no doubt receive particular scrutiny and opposition from the House of Lords. It may therefore be that the provisions of the Parliament Acts 1911 and 1949 have to be relied upon in order for the Government to achieve its desired outcome, which has the potential to precipitate a minor constitutional crisis.

It is also possible that the House of Lords could attempt to retain its powers by requiring much more detail to be contained within primary legislation - which it has a role in approving - rather than leaving the detail to be included in statutory instruments as is the current general practice. Indeed, this is something which is also recommended in the report.

That would suggest that in order to progress the legislative changes required to implement Option 3 on a timely basis, the two Houses will in any event need to co-operate. It may be that compromises or deals on other House of Lords' reforms, primarily but not solely its composition and size, are part of that co-operative process.

Given the likely need for such co-operation, the question that then arises is whether Option 2, which is essentially dismissed by Lord Strathclyde on the basis that reaching agreement is unlikely, may be a more viable and better option in the shorter term.