Patrick McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)

The clause brings us to part 4 of the Bill. To use a lay term, I would summarise part 4 by saying that it is related to an aspect of the job description of regulators. This part of the Bill was significantly improved as a result of discussion and amendment in the other place and it gives us two important clauses, beginning with clause 72. I am sure that we would all agree that part of the job description of regulators—not the whole of it—should be, as the clause states, that they exercise their functions in a manner that does not impose unnecessary burdens or maintain burdens that the regulator considers to have become unnecessary.  The point about the regulator making the judgment is one of the changes that have been made as we have moved along the line in debating the clause.

In overview, the clause is about helping to ensure that regulators do not impose or maintain unnecessary burdens. Subsection (2) provides that where the duty has been imposed, unnecessary burdens need not be removed where it would be impracticable or disproportionate to do so. The sense of proportion is important because it is something that has been added. We could find a situation where a burden had been identified by a regulator as being unnecessary but the act of removing it would be completely disproportionate to the burden that it was placing on the regulated bodies. Subsection (2) allows that question of proportion to be taken into account.

In following this duty, the Government do not intend that regulators should divert resources from their core functions in a way that compromises their effectiveness. As I said, this is part of the job description of regulators; it is not in any sense the whole job description. In considering unnecessary burdens, we expect that regulators should be able to target their resources more effectively, therefore enhancing regulatory outcomes. Subsections (3) to (6) require a regulator to whom the duty has been applied to publish a statement as soon as is reasonably practicable, setting out what they propose to do in the following 12 months. Statements must then be published annually, so the clause asks regulators to keep a constant eye on the question of unnecessary burdens. That is important because in the regulatory field we often talk about the need for a culture change, and the provision whereby the issue will be considered annually is intended to embed that approach.

Mark Prisk (Shadow Minister, Business, Enterprise and Regulatory Reform; Hertford & Stortford, Conservative)

In the light of the duty and the knowledge that the Government intend to establish regulatory budgets, how does the Minister see the two policies interweaving? I can see a connection, but it would be helpful to understand how that will work. There is a new duty not to have unnecessary burdens, and he has just spoken about wanting to encourage regulators to use their resources appropriately. How does that fit into a regulatory budget environment?

Patrick McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)

The hon. Gentleman is right to suggest that regulatory budgets are much discussed and have significant potential in this field. They will focus people’s minds not only on what is coming in, but on what could be taken out. I think that that would help in a regulatory budget environment, because there would be a duty on regulators constantly to have an eye on the stock, as it were, as well as the flow. I do not see a contradiction between the two elements; in fact, I think that they go well together.

The power is an important addition to the suite of provisions that are designed to embed this agenda within the group of regulators operating in this country. I stress that it is not new or unheard of; it is similar to the duty in the Communications Act 2003 that requires Ofcom to keep its functions under review, with a view to ensuring that unnecessary burdens are not imposed or maintained.

The clause also provides an avenue for implementing the recommendation by the House of Lords Select Committee on Regulators in its recent report, “UK Economic Regulators”, that

“economic regulators be statutorily required to facilitate the competitiveness of UK firms by...removing regulatory burdens from firms wherever possible.”

The clause is in line with that recommendation.

Mark Prisk (Shadow Minister, Business, Enterprise and Regulatory Reform; Hertford & Stortford, Conservative)

I welcome the Minister’s remarks. Indeed, I welcome what is in effect a new duty to keep the regulatory function under review and for regulators of the various hues that we have been considering under this legislation not to impose an unnecessary regulatory burden. It is fair to say that the clause has changed quite remarkably from the original drafts that I saw in early forms of the Bill that were considered in the other place. I commend the other place for the work that it did.

I also welcome the recognition of the need to remove such burdens, which is noted in subsection (2). However, I note that the regulator, whoever that may be in any circumstance, will still be left to decide, first, what is or is not, in their view, burdensome, and secondly, whether its removal would be impracticable or disproportionate. The requirement to publish an explanatory statement is fine in itself, but I am disappointed that notably lacking is a clear statement, a requirement—I did not hear this in the Minister’s remarks—for direct consultation and/or involvement of business in determining whether a regulatory burden is unnecessary.

This is a missed opportunity, if I may say so. I hope that the Minister will correct that in replying to the debate. I suspect that to rely on regulators regulating themselves is not likely to deliver the significant change that we would all like in this area. Understandably, given the general circumstances politically, Ministers are talking a great deal about wanting to listen to business and to reduce the regulatory burden—heaven knows, with the state of the economy, that is long overdue—yet they have missed this opportunity to do so. Often it is the regulated, not the regulator, who is best able to judge what is an unnecessary or disproportionate burden. The Minister will probably retort that, by using the Hampton principles, here embedded in the Bill, the regulators will be able to make that assessment. However, to fail to enable business to affect the decisions is a serious omission.

I am particularly concerned for small businesses. Both sides of the House agree that regulations have a disproportionate impact on the smallest businesses. The Federation of Small Businesses tells us that the average small business spends seven hours a week complying with Government red tape and regulation. Given that there are 4.4 million small businesses in the UK, that is an extraordinary waste of what could be highly productive time.

Judy Mallaber (PPS (Rt Hon Baroness Ashton of Upholland, President of the Council (Leader of the House of Lords)), Privy Council Office; Amber Valley, Labour)

Does the hon. Gentleman agree that if we consult businesses, which is what I think he is suggesting, we have to be careful that the business does not put forward as unnecessary regulation something that is a regulation for a good purpose? Something that may seem a burden on a business could have a proper protective or administrative purpose. I have difficulty seeing why we should just leave it to that business. We must also be careful that we do not start to put too much burden of regulation on the regulator, otherwise we will find ourselves with mirrors on mirrors—potentially more administrative burdens.

Mark Prisk (Shadow Minister, Business, Enterprise and Regulatory Reform; Hertford & Stortford, Conservative)

I understand the hon. Lady’s point. She is right that it would not be appropriate for the regulated to decide what regulations there should be. My concern is that the regulated, rather than the regulator, should be able to be involved—indeed, expressly—in looking at where the problems are. They should be able to say, “We are having a real problem with this particular regulation.” It should be expressly stated. That, I think, is the omission.

The hon. Lady is right that the decision must inevitably rest with the regulator. My concern is about the omission of an explicit mechanism or trigger to ensure that business understands that it has a part to play in an important duty being put forward by the Government. Perhaps such a provision will be set out in response to the debate, in the statements that the Minister may be writing as we speak. Can he tell us what consideration he and his officials have given to the inclusion in the clause of a provision that the regulators should respond to business concerns about regulation? What considerations have they made? Has the Minister held any meetings with the business community, to discuss the clause and how business might aid the process of rooting out unnecessary burdens?

Members of the Committee will be familiar—I know you are, Mr. Chope—with the British Chambers of Commerce burdens barometer. We could debate the strengths and weaknesses of any methodology of judging, but the British Chambers of Commerce is well placed to do so.

Judy Mallaber (PPS (Rt Hon Baroness Ashton of Upholland, President of the Council (Leader of the House of Lords)), Privy Council Office; Amber Valley, Labour)

Does the hon. Gentleman accept that many people think that the business barometer is absolute nonsense and makes no sense whatever? That view was expressed to the Regulatory Reform Committee, of which I am a member, by many organisations. The barometer is not a tool that has a great deal of respect.

Mark Prisk (Shadow Minister, Business, Enterprise and Regulatory Reform; Hertford & Stortford, Conservative)

I am sure that is the hon. Lady’s view, but I suspect that it is not the view of the British Chambers of Commerce. It is not my view. It is important that we have a clear, itemised list of what the burden of regulation is. The barometer has shown that the burden of regulation has increased by £65 billion over the past 11 years— £10 billion in the past 12 months—so there is clearly a problem. We can argue over one item or another, but the principle is the same.

To conclude, why does the clause not reflect the clear interest and concerns of business? Why is there no guidance from the Minister to show that business can participate, and is welcome to do so, in trying to identify unnecessary burdens of regulation? I hope that his response will lift the cloud of uncertainty and demonstrate that business has a part to play. I look forward with eager anticipation to his remarks.

Lorely Burt (Shadow Minister, Department for Business, Enterprise and Regulatory Reform; Solihull, Liberal Democrat)

I find part 4 somewhat confusing. It was not originally part of the Bill, and seems to have been tagged on at the end without any consultation—indeed, after the consultation period. I wonder if that is reflected in some of the potential for duplication we have seen. Although I accept that it is vital that not one unnecessary burden is imposed on business, I am almost tempted to wonder why this part is necessary. What is it saying that is not implied or embedded elsewhere in the Bill? Is the  duty not to impose unnecessary regulatory burdens so good and so important that—a bit like “New York, New York”—it has to be said twice?

In relation to the comments of the hon. Member for Hertford and Stortford about mechanisms and how the system would work, other than what exists, what would this part of the Bill impose on LBROs or others to fulfil the requirement not to impose unnecessary regulatory burdens? The Government have set the target of a 25 per cent. reduction in unnecessary burdens by 2012, but they have achieved only 6 per cent. so far, so I am sure that additional help would be extremely welcome. However, what do these provisions bring to the Bill?

Patrick McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)

The hon. Member for Hertford and Stortford asked about a few matters on which I hope to give him some satisfaction. He asked about business input into the level of burdens or whether burdens can be removed. As the hon. Member for Solihull said, the Government have a specific target to meet.

I shall come to the burdens barometer of the British Chambers of Commerce in a moment, but to rewind on the Government’s position, several years ago, we set about the task of measuring the administrative burden on UK business and setting a target to reduce it. The job description for regulators has become part of the job description for Whitehall Departments. Each year, simplification plans are produced. The hon. Lady referred to them and I confirm that so far we are on track to meet them, although I cannot predict the future with certainty—no one can. However, the plans involve a serious exercise that has focused minds in Whitehall. We talked a moment ago about regulatory budgets. The duty is not a regulatory budget, but it is related in the sense that it asks Departments to think about the overall impact of what they do and the stock that is focused on, and to find ways of simplifying and easing matters for business.

The hon. Member for Hertford and Stortford asked about business input. I refer him and other hon. Members to the website, www.betterregulation.gov.uk. If he or a business feel that a particular regulation has become outdated or unnecessary, they can ask for it to be looked at to see if it can be removed. That action would not be giving the business a promise that the regulation would disappear like a puff of smoke, but it would force the Department to consider the matter. There is certainly capacity in the overall regulatory set-up for business voices to be heard.

Mark Prisk (Shadow Minister, Business, Enterprise and Regulatory Reform; Hertford & Stortford, Conservative)

There may indeed be existing channels, but there is no requirement related to the clause by which the regulators shall specifically talk to or involve the business community. Can the Minister confirm that?

Patrick McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)

At the end, the clause confirms that the regulator will carry out that judgment. We have covered a couple of times in our debates on the Bill the matter of whether it can be entirely down to the regulated to make that judgment. I am sure that, as part of the annual process that we are setting out in the clause, any sensible regulator will discuss the regulatory burdens with those on whom those burdens are imposed. If a business feels that a regulator is interpreting policies in a way that imposes unnecessary burdens, it is entitled to  raise the matter with the regulator. An annual review will help to promote that kind of dialogue between regulators and business. However, I do not see a need to write that into the legislation: I think the review will result in that.

However, I want to take the hon. Gentleman up on the British Chambers of Commerce survey, which has been cited a lot in our debates. We have not had too much party divide during our deliberations on the Bill, but the Government would see some of the things that have been cited as burdens in the BCC list not as burdens but as marks of a civilised society and an economy with proper rules. Instances in the list refer to disabled access to public transport, but I do not see that as a burden on business.

Judy Mallaber (PPS (Rt Hon Baroness Ashton of Upholland, President of the Council (Leader of the House of Lords)), Privy Council Office; Amber Valley, Labour)

Does my hon. Friend agree that the problem with the barometer is that it mixes up a burden with a legitimate policy objective that can be discussed and argued about? It does not confine itself to genuinely administrative areas, such as when one of the objectives is not being implemented in the most sensible way to avoid a burden on business. For example, an objective could require someone to fill out three forms, when one or none would do. That is what the barometer should be identifying, as is the case with a number of the European countries that the Regulatory Reform Committee visited within the last couple of weeks.

Patrick McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)

My hon. Friend is absolutely right. There is a completely legitimate discussion to be had, and a legitimate case to be made, about the administrative burdens of the total sum of regulation. However, given the way that the Government have set up their review, that would be a separate discussion from policy outcomes. My hon. Friend’s description of the BCC list is absolutely right, because it mixes up the two things. We can probably all have an argument about one person’s burden being another person’s legitimate policy outcome, but in my view that is the weakness in the BCC list.

What do we mean when we talk about unnecessary burdens? They are burdens that are disproportionate to the regulator’s policy objective; in other words, they go further than is necessary to achieve the objective. They are targeted at situations where action is not required to achieve that objective, or are imposed in circumstances in which it would be possible to achieve the outcome in a less burdensome way.

We are not trying to set up a duty that interferes with the operational independence of the regulators; we are talking about the way in which they carry out those functions. That is why part 4 is a useful part of the Bill.

Mr. Priskrose—

Patrick McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)

I was about to sit down, but I am happy to give way.

Mark Prisk (Shadow Minister, Business, Enterprise and Regulatory Reform; Hertford & Stortford, Conservative)

I shall intervene only briefly, and I will not stretch your patience, Mr. Chope, with an in-depth exposition of the British Chambers of Commerce barometer, except to say—in response to the Minister’s comment—that where a cost is incurred on, for example, the pay roll of a business, it is legitimate for that to be noted as a cost, however legitimate the policy may be.

My question to the Minister goes to the heart of the debate. If it is not explicit in the clause, will he join me in urging business that where they identify unnecessary burdens, with this new duty in place, they should make their concerns directly known to the regulators involved, so that there can be a genuine partnership in the process? Does he share that view? Will he join me in making that encouragement to the business community?

Patrick McFadden (Minister of State (Employment Relations and Postal Affairs), Department for Business, Enterprise & Regulatory Reform; Wolverhampton South East, Labour)

Let me put it in my own way. First, there are existing avenues, as I have discussed, as well as a serious Government process to reduce administrative burdens, in which business has a completely legitimate voice. Secondly, the duty in clause 72 for an annual review of unnecessary burdens will entail regulators discussing those burdens with business.