On 7 March 2022, the House of Lords is scheduled to consider approval motions for two sets of draft regulations:
- the Trade Union (Levy Payable to the Certification Officer) Regulations 2022; and
- the Trade Union (Power of the Certification Officer to Impose Financial Penalties) Regulations 2022.
Both instruments were laid before Parliament on 14 December 2021 under provisions in the Trade Union and Labour Relations (Consolidation) Act 1992 inserted by the Trade Union Act 2016. They are both subject to the draft affirmative procedure, which means they require approval by both Houses before ministers can sign them into law.
Lord Bassam of Brighton, Labour’s Shadow Spokesperson for Business, Energy and Industrial Strategy in the House of Lords, has tabled a motion to regret the first instrument on the grounds that it would “impose an effective tax on trade unions to cover the costs of the Certification Officer, to whom very few complaints have been recorded, and which is not the case for other civil society institutions”.
If agreed to, the regret motion would put on record that the House of Lords had reservations about the regulations for the reasons stated. But it would not stop the instrument from becoming law if the House otherwise approved the Government’s approval motion.
What do the instruments do?
The two instruments propose changes to the role and powers of the Certification Officer. The holder of this post is responsible for regulating trade unions and employers’ associations. Under current arrangements the officer’s work is funded by the Department for Business, Energy and Industrial Strategy (BEIS).
The House of Lords Secondary Legislation Scrutiny Committee (SLSC) has summarised how the instruments would change the Certification Officer’s role and powers. The committee explained that the first instrument would permit the regulator to require trade unions and employers’ associations to pay a new levy to fund its costs. It added:
This is the first use of this power. The instrument proposes the principles by which the Certification Officer will calculate the levy each year, based on its expenses. The cost of external inspectors and external legal services will be excluded from the levy. BEIS says that a separate instrument will be brought forward once the draft regulations have been approved to revoke fees which the Certification Officer currently charges for functions whose costs will be subsumed within the new levy. The impact assessment estimates that around £1.15 million of the Certification Officer’s annual operating costs of £1.18 million will be recovered through the levy.
An explanatory memorandum published alongside the regulations provides further background.
The Government has said the new levy would bring the Certification Officer into line with other regulators such as the Pensions Regulator and the Financial Reporting Council. In draft guidance for affected bodies published in December 2021, the current Certification Officer, Sarah Bedwell, said the levy charge for the first levy period would be due for payment in May 2023.
The SLSC also explained how the second instrument would allow the Certification Officer to impose financial penalties on trade unions and employers’ associations for non-compliance with statutory requirements. It added:
BEIS says that unlike many other regulators, the Certification Officer currently has no powers to impose any form of financial sanctions. This instrument proposes maximum penalties of between £5,000 and £20,000, depending on the severity of the obligation that has been breached, and a minimum of £200. The department explains that relevant statutory obligations relate, for example, to the political funding of trade unions, the proper conduct of union elections and matters of personnel propriety. For trade unions and employers’ associations with fewer than 100,000 members, the penalty maximum will be reduced by 50%.
If approved, both instruments would come into force on 1 April 2022 and apply across Great Britain.
What scrutiny has there been so far?
Committee consideration and earlier consultations
In its report on the regulations, the SLSC noted both instruments as ‘instruments of interest’. It made the following observation on trade union opposition to the proposals:
We note that during consultation, trade unions expressed general opposition to the principle of a levy and strongly objected to the changes to the role of the Certification Officer as a whole, and to the proposed financial penalties specifically.
BEIS ran a consultation on a levy to fund the Certification Officer’s oversight and regulatory work between 31 August 2017 and 26 October 2017. The Government published its response in June 2021. This noted that there had been 34 responses to the consultation. The Government said a majority of responses had opposed the proposals:
A number of responses (21 in total) expressed general opposition to the principle of a levy. They argued that it was appropriate for the state to fund a regulator such as the Certification Officer, and that passing the cost on to trade unions in particular took funds that could otherwise be spent representing members and tackling unfair employment practices. They also expressed concern about the Certification Officer’s objectivity and accountability given the Officer’s funds would be coming from the organisations it regulates.
However, the Government argued that the “principle of a levy was debated during the passage of the [Trade Union Act 2016] through Parliament”. It added that it “continue[d] to believe that it is reasonable for the Certification Officer’s costs to be borne by those organisations it regulates, rather than the taxpayer”.
BEIS ran an earlier consultation on enforcement powers for the Certification Officer, including a power to impose financial penalties, between 9 April 2017 and 21 May 2017. The Government responded in June 2021. This noted that 15 consultation responses had been received from the Trades Union Congress and large and medium sized unions. It said the union respondents had “submitted views that extended beyond the Government’s proposals on the financial penalties regime to the reforms of the role of the Certification Officer more widely” and listed their objections. These included:
- that they were “strongly opposed to the reforms to the role of the Certification Officer as a whole as these represent a serious intrusion into the internal affairs of trade unions by the state”;
- that there was “no regulatory failure in this area and therefore no requirement for these reforms—unions have a good record of compliance with statutory obligations”; and
- that the “proposed level of penalties is disproportionate. The Government should reduce the minimum and maximum penalties which can be applied by the Certification Officer”.
In response, the Government said that many of the comments had been “addressed during extensive debates in both Houses of Parliament during the passage of the Trade Union Act 2016”; that the enhanced powers for the Certification Officer were “comparable with those relating to many other regulators”, such as the Electoral Commission; and that it believed the reforms remained “necessary”.
House of Commons consideration
Paul Scully, Parliamentary Under Secretary of State for Business, Energy and Industrial Strategy, introduced the debate on behalf of the Government. He said the Trade Union Act 2016 had provided for three reforms to the role of the Certification Officer and that the regulations being considered provided for the second and third of these. On the levy in particular, Mr Scully said it was “no longer acceptable” for the taxpayer to fund the regulation of trade union and employers’ associations. He argued the proposed levy was an “equitable, affordable, predictable and simple” alternative.
However, speaking on behalf of the Labour Party, Imran Hussain, Shadow Minister for the Future of Work, called the proposals an “ideological, deliberate attack by the Government on our trade unions, our workers and their rights”. Mr Hussain argued that the levy proposal would “impose unnecessary and disproportionate costs on trade unions and would take money out of the funds used to fight for better pay terms and conditions”, adding that the levy proposal was “almost as absurd as saying that charities should pay for the Charities Commission”. In addition, Mr Hussain also questioned why other powers were needed when “trade unions have high compliance rates with their legal duties”. He added that the Certification Officer had “dealt with just 34 complaints against trade unions, not one of which ended up with an enforcement order being pursued”. He said later that this worked out as “one complaint for every 200,000 union members”.
After debate, the committee approved both instruments on division by 10 votes to 7. The House of Commons then formally approved both instruments the following day. The first set of regulations was approved on division by 298 votes to 176, and the second on division by 297 votes to 182.
- Certification Officer, ‘General announcements and latest decisions’, accessed 1 March 2022; and Implementing the Remaining Provisions of the Trade Union Act 2016: Guidance on how the Certification Officer Intends to use these Powers, December 2021
- Department for Business, Energy and Industrial Strategy, ‘Trade Union Act 2016: consultation on the Certification Officer’s levy’; and ‘Trade Union Act 2016: consultation on the Certification Officer’s enforcement powers’, accessed 1 March 2022
Cover image by Dominika Gregusova on Pexels.