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I beg to move,
That this House
draws attention to the escalating cost of regulation and the increasing number of cases where regulation either achieves nothing or does positive harm to those being regulated;
urges the Government to produce a deregulation Bill which goes beyond exhortation to better regulation by repealing unnecessary and burdensome laws and rules;
encourages the Government to table a programme for the UK Presidency of lesser and better regulation for the EU as a whole;
and asks the Government to bring forward proposals which free professionals in hospitals and schools, which cut the costs of controls over elected local government, and allow business in the UK to compete more successfully against Asian and American competitors.
In moving this motion, I am a little bemused by the Government's response. I crafted the wording of the motion myself—it is a veritable pussycat of a motion. My right hon. and hon. Friends have been too generous. They have not said, "Are you losing your touch? Where is the tiger in the tail?" It was deliberately couched in words that I thought Her Majesty's Government would welcome. I have heard many fine words from the Prime Minister; even more remarkably, I have heard sometimes similar fine words from the Chancellor of the Exchequer. It appears that, at times, this is one issue on which they agree: they now wish to run a deregulatory Government. In this motion, I give them a little encouragement, assistance and advice. Its wording is surely unexceptionable—if they are as truly committed as some of the readers of their words might expect.
"urges the Government to produce a deregulation Bill which goes beyond exhortation . . . by repealing unnecessary and burdensome laws".
Do I take it from the Government's wish to strike our motion from the Order Paper when proceedings conclude that they no longer wish to have a deregulation Bill—there was one in the Gracious Speech—or do they wish to have a deregulation Bill with nothing in it? Are we to have yet more words and no action? Are we to have deregulation in the title, but nothing actually deregulated? That is very new Labour—very fashionable circa 1997—but perhaps not in the spirit of the modern world.
In the motion, I encourage the Government
"to table a programme for the UK Presidency of lesser and better regulation for the EU as a whole".
Surely they can assent to that very modest proposition. I wanted to include a list of all the regulations that we want repealed—[Hon. Members: "Go on."] Well, we might do that later, if time permits. I thought, in order to be in sympathy with the Government, "Better the sinner who repents." I thought they had realised that they passed too much regulation in their first eight years, and that they might agree to table a paper for the EU presidency containing positive proposals for deregulating the EU. But no, I see from the stony faces of the Government Front Benchers that there is no wish to table a paper setting out matters that can be repealed during the British Government's presidency.
My motion then suggests that the Government
"bring forward proposals which free professionals in hospitals and schools".
I accept that such an idea would probably put me on the ultra-Blairite wing of the rather ragged Labour coalition, but surely it is just within the spectrum. We know that the Prime Minister and the Chancellor are locking horns on this issue. The Prime Minister makes the occasional speech, or allows the occasional briefing to be made to the press saying that our professionals in schools and hospitals need more freedoms, hence the ideas behind the early versions of foundation hospitals and special schools. We know that the Chancellor has been sandbagging those and pulling back, but I hope that the Treasury Front-Bench Members—particularly the Chancellor of the Duchy of Lancaster, who may be on the Blairite wing—may be able to tell us tonight that they need to go further in freeing the professionals who are damaged by the red tape, interference and bossiness that have characterised the eight years of this long Labour Government.
Does the right hon. Gentleman agree that the task of any Government is to strike the right balance between regulation on the one hand and minimum standards on the other? Over the eight years to which he referred, does he agree that the introduction of the national minimum wage was the sort of regulation that he should have supported when he was a Minister in the last Conservative Government?
Of course Governments have to find a balance between necessary regulation and leaving individuals and businesses free enough to go about their daily lives and compete. Our charge against the Government tonight is that that is precisely the balance that the Government have struck incorrectly.
The hon. Gentleman has had his chance, and I am merely explaining our position, which is that the Government have regulated too much. That includes too much intrusive labour market regulation. As the hon. Gentleman tempts me on labour market regulation—[Interruption.] The hon. Gentleman really must contain himself. If he is lucky in catching Madam Deputy Speaker's eye later, he will be able to tell the whole House in a proper way exactly what he thinks about labour regulation.
The Conservative party believes that there is now too much labour regulation in total. We believe that it is vital for the Government to try to hang on to the opt-out from the working time directive. We are angry that the Government Front-Bench Members say that they want to keep the opt-out, while Members of the European Parliament elected on the Labour ticket are busily trying to undermine them and do the opposite. Perhaps if Ed Balls makes a speech, he will explain the huge contradiction that lies at the heart of the different elected levels of Labour.
Does my right hon. Friend recall that, despite being asked, former Labour Front Benchers not only refused to condemn the Labour MEPs who repeatedly voted to scrap our valuable opt-out from the working time directive, but urged Conservative MEPs to continue to carry on voting as they were to preserve this country's opt-out? Does my right hon. Friend agree that the Government are in a great muddle over that?
That was an excellent intervention, which shows the hon. Member for Normanton how he should aspire to do better in future. My hon. Friend has put his finger on the crucial point that applies in this interesting matter.
We have before us tonight a lame Government counter-motion, which is so self-congratulatory and complacent that, even coming from this Government, it really beggars belief. On the eve of our presidency attempt to deregulate the European Union and before the Government launch their deregulation Bill, we are invited in the Government motion to praise them for all the wonderful things they have done in producing better regulation. As I hope to demonstrate to the House, the contrary is the case.
The Government have greatly burdened British business. Instead of deregulating, according to the British Chambers of Commerce, they have now added a cumulative £40,000 million of extra costs on British business. Before Labour Members say that there were many fine things in all that regulation, let me make it clear that there is one thing worse than having an unregulated job—and that is having no job at all. The danger of what the Government are doing by piling cost on cost, rule on rule, is that it is undermining our competitiveness in the world economy. The Chancellor constantly tells us that China is a great competitive threat, yet he continues to burden our businesses.
A very large number of jobs, especially in the public sector, have been created, but the right hon. Gentleman is wrong to ignore the 1 million manufacturing jobs that have gone. That is very serious. We have had several manufacturing recessions—not overall recessions—during the Government's term of office, and Treasury Ministers are quite wrong to ignore the stresses and strains in manufacturing, as they have for so long in government. It is particularly rich for the Chancellor of the Exchequer, who spent so many days and hours in opposition over the long years, to make claims about the statistics. Figures from the Library show that, from time to time, manufacturing jobs were lost under the last Conservative Government, and the Chancellor always led the public to believe that it would be very different under Labour. What he did not explain was that, in respect of job losses, the difference would be consistent and on a huge scale.
Only last week, a manufacturing firm, Pennine Fibres, in Denholme—a village that is certainly not in the most affluent part of the area—closed down, costing another 80 jobs in my constituency. Part of the reason why that happens is that there is so little expertise among Government Front Benchers at running a business. They simply do not understand the problems they are causing.
I am grateful to my hon. Friend, and I hope that he will convey the Opposition's sadness about those job losses to those who have suffered them. It is a very good example of a more general problem. As businesses have made the Opposition aware, such problems are the result of Government actions. Today, for example—
Before the right hon. Gentleman moves on from manufacturing jobs, may I tell him that, unlike him, I represent a manufacturing constituency? It currently has 1.4 per cent. unemployment. I accept that many manufacturing jobs have been lost, but that has been the pattern throughout the western world. What regulations—not European regulations, but regulations specific to the Government—would he scrap to make us more competitive with countries such as China and India, where many of the jobs have gone? What changes would he make?
The hon. Gentleman wrongly claims from a sedentary position that I am frightened. I am not at all frightened, as I am sure the House knows, and I am about to come on to the regulations that we believe should be repealed in forthcoming Government legislation to make us considerably more competitive.
Before I finish this general point, it is worth reminding the House that we read from an extensive brief in one of the leading newspapers today that the Government now believe that the total cost of regulation each year is £150 billion. Indeed, the very arresting headline said that regulation now costs everyone more than the Inland Revenue charged us all in income tax. It is a terrifying figure. Those who saw the article will know that it continued by pointing out that a team of about 80 officials are working away over a nine-month period to try to come up with an entirely accurate costing. [Interruption.] I am asked whether the figure is true. I cannot verify it completely tonight, having only seen it this morning, but it seems a pretty good ball park figure and it feels plausible, given that we know that the cumulative total of extra regulation under the Government is £40 billion. They inherited some of that, but made it worse through over-implementation.
Perhaps I can throw a little light on just a fraction of that burden. Is my right hon. Friend aware that Hampshire county council, which has consistently been rated excellent without the necessity for all these targets, has supplied me with a list of more than 22 A4 pages listing 400 indices, targets and standards of performance on which it is obliged to report. It uses up resources equivalent to the employment of between six and eight teachers in simply reporting back to the Government on the extent to which it has managed to meet the overwhelming burden of targets imposed on it.
My hon. Friend makes a powerful point. It is one of many examples that Members could provide, and some will, about the huge impact of such regulation and how it diverts people and money from things that are worth doing—in my hon. Friend's case, the good example of providing more teachers—to things that are not worth doing, which amounts to bossiness gone mad.
The Government churn out more than 4,100 new regulations a year, or 16 for every working day. Our position in the world competitiveness league, as measured by the World Economic Forum, has fallen from fourth when the Government took office, to 11th today. They should be extremely worried by that.
What could we do? Several straightforward steps could be taken, by a deregulation Bill, which we have been promised, and through the mechanism of the EU presidency, with the UK guiding the agenda with our partners in Europe on the regulations that fall from the Brussels printing presses. After all, the Government are undoubtedly good at one or two things—[Hon. Members: "Hear, hear."] Well, Labour Members will love this. One of those things is making ever more rules and regulations that become the bane of our lives. Some of those regulations miss their target, some hit the wrong targets and some, such as ID cards, are regulations in search of a target, as the Government try to find something that the cards could achieve, having decided that they must tie us up in knots with that legislation.
There are the regulations that try to protect us when we do not need protecting. The vitamin supplements and food additive regulations are the combined effort of Brussels and this Government. As always under this Government, we have gold-plated those regulations and steamed ahead to implement them this summer. They were of course too sensible to implement them just before the general election. Even this Government realise that the regulations are mightily unpopular, but they will be implemented this summer. That will mean price increases and bans for popular products, affecting millions of people who would like to continue to be able to buy them.
We read, in briefings from mysterious sources, that the Prime Minister himself is aware of how foolish and unpopular the regulations will be. I praise Carole Caplin, because I understand that she is a sage adviser on that issue and I wish her every success in strengthening the Prime Minister's arm against those regulations. Will the Government promise tonight that they will take counter-proposals to Brussels on that issue? Will they try to sort it out before it grinds its way through the courts? Will they accept tonight that the regulation is unnecessary and that they should use some political capital to get it rescinded in Brussels?
Then there are those regulations that seem to have no purpose at all. Identity cards started life as a means of stopping illegal immigrants entering the country. When we pointed out that people need a passport to enter the country and that there was no need to require a different document that was available only to those established as British citizens anyway, the Government backed away from that proposal and said that ID cards could be used for crime busting. The quality of criminals is probably higher than the Government reckon, so I suspect that few burglars will take their ID cards with them and drop them on the doormat before they leave the house with the goodies. Short of that happening, it is difficult to see how ID cards would have a huge impact on catching criminals who break into our homes or do damage to our cars. Now, we are told that ID cards will combat identity theft. Apparently, that is a growing and serious crime and the Government think ID cards will combat it when national insurance numbers, passports and other means of identification, including driving licences, cannot. Next week, ID cards may be an essential aid for anyone who has to go to a computer dating agency to sort out their social life.
Then we have the regulations that are over the top and silly, out of all proportion to the possible risk. We have the risk assessments that are now demanded by some councils before people can undertake sponsored walks. I read about a case a few weeks ago when the council said that the person organising the sponsored walk had to walk the circuit three days in advance and ensure that there were no dangerous rabbit holes. If there were, the organiser had to ensure that everybody on the walk was fully briefed about them before going on the walk. However, nobody told the rabbits, any of which could have dug a dangerous hole between the reconnaissance and the briefing. I wondered whether the briefing would cover that crucial point. Can the Government not see that that is ridiculous and put something in the Bill about proportionality to try to calm down such activity?
I am tempted to suggest that we follow the American example and have a "Warren" commission to investigate the matter. On a serious point, perhaps the right hon. Gentleman is being a little unfair to local government, which often responds to the pressures and constraints of its insurers. It is not necessarily the local authorities that pursue such issues to the point of lunacy.
I think that local authorities are pursuing the Government's agenda, and they must send a new signal.
Another example is the regulation of school trips. I printed off the website the forms that have to be filled in before children can be taken on a school trip.
Is my right hon. Friend aware that the Health and Safety Executive now has some 9,000 officials? They have recommended that the hairbrushes should be withdrawn from the Members' Cloakroom on the basis that we may catch nits or AIDS. They are also of the view that Members should not use kettles in case we burn ourselves, so we all now have hot-water systems. Is my right hon. Friend aware of these ridiculous attitudes, which mean that the HSE affects us even here?
I am grateful to my hon. Friend for a powerful intervention. However, if I were to assert that there were nits in the House, it might be deemed unparliamentary language, so I shall not go any further down that route.
Nine different forms have to be filled in before a teacher can take children on a school trip, and if a swimming pool visit is involved, another two are added. I shall not read the forms out, but they are bizarre in their detail and complexity. Of course, teachers should need permission and should behave reasonably—I am sure that they do—but they should not need to fill in nine forms. The regulations are becoming an impediment to organising trips and it is easier not to bother.
Then there are regulations that achieve the opposite of what was intended. The common fisheries policy is perhaps the best and biggest example of that. In the name of conservation, fishermen are told that they have to hurl dead fish back into the sea if they catch the wrong kind of fish. That means that they have to go and catch more of the right kind of fish for people to eat, instead of being able to sell the dead fish and avoid having to rape the seabed further. That is madness. The Government must recognise that and either use some of their influence in Brussels to achieve a fundamental revision of the CFP or repatriate the policy, as the Conservatives wish to do.
Then there are regulations that miss the target. The Government's policy for tackling road accidents and deaths—an important issue—has been based almost entirely on the control of speed. They have not been deterred by the fact that less than one in 10 of all accidents on the road has speed as a prime or important cause and they have ignored all the evidence that shows that many dangerous accidents occur well below the maximum speed limit at junctions with a conflict of traffic and different types of users on the same road space. Because the policy rested on speed cameras, we had a reversal in the trend for several years and road deaths started going up again. I am pleased that figures for the most recent year show an overall fall, but in the area most dependent on speed cameras—north Wales—the trend in deaths and serious accidents has continued to rise. The Government should consider that and accept that their single over-regulated policy is not working, because it does not tackle the causes of the problem.
Does my right hon. Friend agree that we have a complete imbalance in regulation? On the one hand we have some 5,000 deaths a year on the roads—[Hon. Members: "Three and a half thousand."] I meant approximately. On the other hand, the use of certain mineral and vitamin supplements will be banned even though there are few, if any, recorded cases of anybody dying from their use.
I am grateful for my hon. Friend's support, especially on the vitamin supplements, because there is no problem with them for the regulation to solve.
Then there are the regulations that seek to make people's lives difficult by being unnecessarily complicated. For example, there are the regulations for people seeking to obtain new pub licences to sell alcohol. The paperwork is enormous. I do not have time to read out any highlights, but there are pages and pages of information. I have identified 24 forms and guidance notes that people will have to wade through to see which is appropriate for their case; everything from feedback forms to premises licences, variation licences, personal licences, club premises certificates, provisional statements and so forth. Anyone trying to run a pub or club now has to wade through 24 items—probably with a lawyer helping them—simply to stay in business. The Government must be extremely worried that so many pubs, clubs and other businesses have not yet applied for premises licences, and that so many people in the trade have not yet applied for personal licences. The deadline is close and there could be chaos in due course, because the Government have made people's lives impossible and caused them so much difficulty.
Does my right hon. Friend recall that nine months ago the Department for Trade and Industry, the arch-regulator of Departments, had to pulp, at a cost to the taxpayer of about £203,000, the dispute resolution procedure for employers and employees? The procedure made things even more complicated by pretending that it was a one, two or three-step process; in fact there were 13 steps. Even the TUC criticised the regulations, saying that they were too complicated and more likely to cause confusion than to solve workplace problems, and the Federation of Small Businesses condemned them as a potential minefield for small firms. Does my right hon. Friend agree that that is another example of over-complication, missing the target and Government irresponsibility?
Will my right hon. Friend join me in asking Ministers to tell us whether they have made a survey of the working men's and other voluntary clubs and sports clubs that have been caught up in the drink licensing regime? Amateurs who run such clubs often have to hire the skills of professionals and pay for them, as well as paying more in fees.
That is an extremely good question and I hope that the Minister will respond.
Much of the regulation of the public sector distorts professional judgments and does damage to the public services that people are trying to run. The education and health targets substitute political priorities for the things that teachers and doctors would do based on their professional judgment. In hospitals, we need to trust the professionals to assess clinical risks and to make their own decisions within the resources available. In the education sector, we need to trust teachers rather more. Instead, a whole army of targets pours forth from Whitehall; there are endless advice notes and guidance notes making it extremely difficult for people to do the job on the ground.
Local government is tied up in knots by the Government. They sometimes say that they like the idea of more devolved local decision making but in practice they take power to the centre. We would like to see the end of the best value and comprehensive performance regimes, which would save £1,000 million in unnecessary overheads and free our councils to get on with the job and answer more directly to their electors. That should be an important part of any deregulation Bill that comes before the House, and if by any chance it has escaped the Government's attention, I trust that we shall be able to move an amendment to give them the chance to include such provisions, which would be much welcomed by Labour as well as by Conservative and Lib Dem councillors.
In the case of village halls, many people who would like to work for community purposes find it too daunting owing to the 18 health and safety regulations and the new difficulties over drinks licences. One modest proposal from the village hall movement is to double the number of temporary entertainment events notices that they can hold, to allow alcohol to be used on village hall premises. Without some flexibility and common sense from the Government, village halls face a bleak future. Surely, the Government can give us some hope tonight about some sensible deregulation to help important community facilities run by volunteers.
Finally in my deregulation list, we come to the Financial Services Authority and City regulation. We learn that the Prime Minister seems to be in disagreement with the Treasury—nothing surprising there, then—on the question of how good the FSA is and whether it is too intrusive. Recently, I saw the City of London corporation's interesting piece of research on the implementation of the money-laundering regulations in the UK, which we had to implement in line with other European partners. Overseas territories outside the EU implemented something similar based on the original G7 agreement. The independent judgment commissioned by the corporation found that it cost twice as much in relation to gross domestic product to implement the regulations in Britain as in Germany. That is a huge over-reaction by Britain. The report goes on to say that the regulations do not make the UK safer from money-laundering than Germany; they are just a costly way of doing it. So, we have a paper chase where people have to take gas bills, electricity bills and passports to their building society just to pay in £100, even though they may have been banking there for many years. Surely something can be done to relieve all that.
I hope that when the Minister responds he will propose some virile, strong and sensible deregulation. I hope that he will tell us what the Government plan to do during their EU presidency. I hope that he will put reform of the CAP and the common fisheries policy at the top of his list. I hope that he will have something to say about vitamins and food supplements, to bring relief to those who value those products and want to carry on buying them. I hope that he will tell us that there is to be real deregulation in his deregulation Bill and not just a lot of mumbo-jumbo and promises to do better in the future, and I hope that he will announce tonight that the Government have seen enough of the public reaction to ID cards and that they will not go ahead with that massive, expensive and over-the-top regulation in search of a problem.
Our economy needs less regulation. Our businesses need less regulation. Our people and families need greater freedom. Will the Government give it to us?
I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
"welcomes the steps the Government is taking to remove unnecessary regulations and rationalise inspection arrangements in both the public and private sectors;
acknowledges the additional freedoms given to high performing schools, hospitals and local councils;
notes the lead the Government has taken in driving forward the better regulation agenda in Europe;
recognises the benefits that well-targeted and proportionate regulation can bring in driving up standards;
and further notes that the UK is seen by international observers as a leader in the field of regulatory reform and that the success of the UK economy reflects the approach the Government has taken.".
I congratulate Mr. Redwood on his speech. I enjoyed his peroration. I do not know whether he will put his hat in the ring for the soon-to-be-declared vacancy in the leadership of his party. He certainly pulled in a decent crowd tonight, so it looks as though he might be in with a shout. All the best to him, because I think it is true to say that all my right hon. and hon. Friends would welcome him as Leader of the Opposition. If he were to inherit that jewel in the British constitution, we might see a little more of him in general elections than we did in the one that just took place.
I want to say a few words by way of introduction. The right hon. Gentleman referred to the motion. For a fleeting moment, I thought that I, too, could be prepared to lend my support to it. However, I prefer my words to his and I am sure he will understand why. Although he made a good speech, and I congratulate him on that, the problem with it was that there were four fundamental flaws.
First, the right hon. Gentleman really needed to establish that the UK economy was performing badly because of the Government's approach to regulation. Sadly for him, the facts do not support his arguments. They suggest the opposite. To give him credit—I always want to be fair to him—he certainly did his best; in fact, he tortured the data until they eventually confessed to him. But as we all know—and the lawyers in the House will know better than anyone else—evidence obtained under duress is never admissible to prosecute a case. He will have to find some more supportive evidence.
Does my right hon. Friend remember speeches made by Conservative Members, when they were in government, about the threat to jobs if a national minimum wage were to be introduced? Does he remember the claims that it would cost between 1.5 million and 2 million jobs? Does not the fact that we have 2 million more jobs, not 1.5 million fewer, show that it is possible to strike a balance between reducing regulation and setting good, sound minimum standards so that people are properly protected at work?
I agree with my hon. Friend. I understand that, only a few months ago, the right hon. Gentleman said that he thought that his observations and calculations about the minimum wage were spot on. They were not—they were completely off the target. There are 2 million new jobs in the UK economy, not 2 million fewer, as he and his hon. Friends predicted.
Did my right hon. Friend hear, as I thought I did, Mr. Redwood cite Germany with some approval towards the end of what passed for a peroration? Research paper 05/53, produced by the economic policy and statistics section of the Library, uses three key figures to show, first, on the output per hour measure, that Germany lags behind the United Kingdom; secondly, on the labour market figure, that the level of employment in Germany is significantly less than in the UK; and, thirdly, on the tax burden, that the UK figure of 37.1 per cent. is significantly below that of Germany. How does he account for those three figures if Germany is doing so well in its deregulated idyll?
I am not sure how the right hon. Gentleman can account for that obvious discrepancy. I want to return to the UK's relative position vis-à-vis the other member states of the European Union. The British economy is certainly outperforming on most of those comparators in the EU.
Will the Minister enlighten us? We keep hearing about how many jobs have been created. I would be interested to know how many of the 1.5 million to 2 million jobs that have been created by the Government are jobs for bureaucrats, and how many of those individuals are regulators?
I think about two thirds of those jobs are in the private sector. As for the additional jobs in the public sector, I do not know what the hon. Gentleman's definition of "bureaucrats" is, but I remember that, when I was in the Department of Health, he and his hon. Friends who sit on the Front Bench used to describe porters, cleaners and other staff who play a very important role in the national health service as "bureaucrats" and "pen-pushers". That is simply not the case. Perhaps he wants to make that point in his own speech. My job is to enlighten him, as he rightly said, and if he will bear with me, I intend to try to.
The second problem with the right hon. Gentleman's speech is that he needed to show that his own record and that of his party supported the case that he made this evening. Frankly, it does not. His own and the Conservatives' record in government fail to match the rhetoric that he deployed in his speech tonight, and I want to return to that point in a minute.
Even the Minister would not argue that farm businesses have prospered under this Government. Farm businesses have been faced with ever-greater regulation, ranging from fallen stock to controls on livestock markets. Farm incomes have fallen consistently. The number of people in farming has also declined since 1997. What assessment has he made of the impact on farming of the Government's activities and, in particular, regulation since 1997?
We are certainly working to support farming. As for the hon. Gentleman's point about regulation, to be fair him, too, I am sure that he would be prepared to acknowledge that many of the regulations he complains about were introduced to try to sort out the mess that the Conservative Government left on BSE and other such problems. Many of those regulations were introduced by that Government.
No. The hon. Gentleman has had his go.
I want to come in a second to the wider issue about sectors, but there is a third fundamental flaw in the right hon. Gentleman's case. He needed to demonstrate that the UK's position in relation to regulatory matters was getting worse vis-à-vis our international competitors. In that respect, too, he had a major problem. There is plenty of evidence from this country and abroad that the UK is making good progress on better regulation—evidence that he conveniently failed to mention. In fact, he overlooked the views of the World Bank, the Organisation for Economic Co-operation and Development, the Heritage Foundation and the International Monetary Fund—all of which he is usually keen to pray in aid. Sadly for him, no such succour or support was available to him from those sources tonight—and again it showed.
Finally, the right hon. Gentleman completely failed to present a sensible analysis of European regulatory issues. He was again overcome by his visceral hatred for everything that originates from the European Union. In fact, he got his best cheers when he was ranting at his very best about the evils of the European Union. I got the sense that he wanted to rerun some of the arguments that we had during the recent general election. Of course, I am very happy for him to do so: Labour won that election. In rehearsing all the failed policies that the Conservative party put before the British people in May, he has only served to remind Labour Members why the British people chose to return Labour for a record third term in office.
I think that it was in 2000 or 2001 that the EU had the Lisbon summit, at which those involved pledged to create 20 million new jobs by 2010. Will the Minister explain in his own words why it is so palpably clear to all hon. Members that we will miss that target? In fact, Europe collectively has not created one new job in that period.
I certainly want to deal with Europe in a second, if the hon. Gentleman will bear with me, but we are doing very well, thank you, in this country because of the policies that we are pursuing.
Does my right hon. Friend agree that much of what Mr. Redwood said was typical Conservative hot air? Does my right hon. Friend know that, on
There was a lot of hot air from the right hon. Member for Wokingham. I have seen the list of proposals that he made for the general election, and we know the outcome of that contest. I want to refer to some of the arguments that he made. He rehearsed some of them tonight, particularly his interesting suggestion that we withdraw from the common fisheries policy. I understand that he wants us to pull out of the social chapter as well, and I want to come to the difficulties that any future Conservative Government would have in delivering such a policy.
The Minister is generous, but I should like to take him up on the four allegations that he made. Does he accept that the United States has consistently out-grown this country over the past eight years because it is less tightly regulated and has a lower tax regime? Is he not aware that we are getting closer and closer to the poor performance of the heavily regulated and higher tax regimes on the continent and that we will not hit the Chancellor's forecasts this year?
No, I certainly do not accept the assertion in the latter part of the right hon. Gentleman's question. I accept that there are lessons that this country should learn from other systems and regulatory approaches. Of course we are willing to learn, but I want to come to the wider point because, fundamentally, his speech served a useful purpose in highlighting our different approaches to this issue. I want to explore those differences in a second, if I can get on to them.
The right hon. Gentleman's central argument related to the health of the British economy and its international competitiveness under this Labour Government. Anyone listening to his remarks would have been left with the impression that our economy was in recession, that Britain was an unattractive place to set up a new business and that a vast army of bureaucrats—to use an expression used by Mr. Newmark—were out and about strangling enterprise and innovation. But this is 2005, not the 1980s, when millions of people lost their jobs because of Tory boom-and-bust policies. It is not the early 1990s, when hundreds of thousands of people lost their homes because of yet another Tory-inspired recession. Of course, the right hon. Gentleman was a key architect of all those failed policies.
That is the history. The right hon. Gentleman indicates that he was not one of the key architects. Of course, he was in the Cabinet until 1995, and until then, he would be prepared to accept that collective responsibility—
Oh, the right hon. Gentleman is not even prepared to accept that any more. We have a new constitutional innovation taking form in front of us.
The big decision to join the exchange rate mechanism—which was Labour economic policy, as well as that of the Conservatives—was a mistake. We have said that it was. I was not in the Cabinet when that decision was taken, and the Minister may remember that I resigned from the Government because I did not like the policy being followed.
I accept that that is historical fact, but the right hon. Gentleman cannot escape his wider responsibilities for the failed economic agenda pursued by successive Conservative Governments in which he was a Minister and, as all of us who have had the great privilege to serve in government know, that is a collective responsibility that we must all shoulder. We cannot shake off that responsibility quite as easily as he has tried to do this evening.
My argument tonight is that, thanks to the policies that we have pursued since we took office, the British economy has enjoyed one of the best climates for business since records began, with sustained economic growth and stability covering the entire period during which we have been in office.
No, I am going to make progress. The hon. Gentleman has had a good old go. Perhaps I will give way to him in a second—or not, as the case may be.
Employment is at a record high; unemployment is at its lowest levels for 30 years; UK unemployment rates are half those for France and Germany; inflation is low; interest rates are at their lowest for 50 years; 4,000 new businesses start up every week; and Britain is the No. 1 country for inward investment into the European Union. Last year saw nearly 40,000 new jobs and a record number of inward investment projects.
From the picture painted by the right hon. Gentleman, one could be forgiven for thinking that he had been living on a different planet. Many people believe that he does live on a different planet, but I do not want to use that gag. Clearly it will not get me much of a laugh tonight. Sadly for him, his views on the British economy are not even shared by other members of the shadow Cabinet. The Leader of the Opposition said of the British economy only recently:
"Unemployment is low. Inflation is low. We're growing faster than many other European countries".
Mr. Ancram said last summer:
"Quite honestly, I go to Germany now and they say to me we wish we had your unemployment".
The views of the right hon. Member for Wokingham are not even shared by business leaders in Britain. The director general of the CBI said in March this year:
"We've got the most successful economy in the developed world. It's completely stable, low inflation, interest rates, virtually no unemployment and quality sustainable growth. Now America doesn't have this with its deficit. France hasn't got it with its very high unemployment. Germany hasn't got it with zero growth and high unemployment."
We have made it clear—this is one area where the right hon. Gentleman and I might agree—that if the progress is to be sustained and if British companies are to remain globally competitive, helping to create new jobs and prosperity here in the UK, Government must, of course, accept their responsibility to strip away the burden of unnecessary regulation on business. I hope that we can agree on that at least. However, I think that there is a huge difference between his approach, which would, for example, compromise standards in the workplace, and the approach that we intend to take. The measures that he put forward at the election to slash public expenditure through axing support for businesses, such as the scrapping of the Small Business Service, would hurt and not help businesses.
Consistency in politics is a good thing. To give him credit, the right hon. Gentleman has consistently talked a good fight on this issue, but has he actually delivered? I think not, and I am going to talk about his record in government. He was a very busy body indeed as a Minister in the Department of Trade and Industry. In fact, I have here just some of his handiwork in the 1980s. Here it is—213 separate pages of new statutory burdens all applying to business.
There are many people who would argue that the regulatory burden actually increased under the previous Conservative Government. Sadly for the right hon. Gentleman, some of them are leading Conservatives. The former Chancellor of the Exchequer, Mr. Clarke, referred to the subject of deregulation in The Daily Telegraph shortly after leaving office. I notice that all these reminiscences and insights occur only when Conservatives leave office. The right hon. and learned Gentleman said:
"We kept trying, we never really succeeded" in deregulating. Mr. Michael Portillo, another leading Conservative and a former Treasury Minister, said when he left office that
"we were rather notable regulators. We passed volumes of new rules and laws interfering with almost every aspect of business and social life."
Clearly, the right hon. Member for Wokingham comes from the "Do as I say and not as I do" school of political leadership. That is perhaps another reason why he is sitting on the Opposition Benches, but perhaps his biggest difficulty tonight comes in the form of the international evidence:
"The UK is at the forefront of regulatory reform".
Those are not my words, but those of the OECD. The UK is frequently shown as at or near the top of countries for the quality of regulation and ease of doing business. A survey by the World Bank published this year placed the UK at the top of the league of major countries in terms of regulatory quality. This year's Heritage Foundation index of economic freedom—something I am fairly sure the right hon. Gentleman normally attaches a great deal of weight to— praised the UK and said that
"opening a business in the UK is easy."
It is clear that this Government's approach to regulatory reform has contributed to the success of the British economy and not undermined it as he claimed.
I am grateful to the right hon. Gentleman for allowing me to answer his point. He says that I used the legislative pen, but I seem to remember using it to deregulate the telecoms industry, allowing a large number of new producers to come into the marketplace and creating an extremely successful industry. That was a deregulatory use of the legislative pen and it worked.
I am not disputing that or the contribution that such an approach can make. It makes the case in many ways for the need to regulate sometimes. The candour that the right hon. Gentleman has just displayed is admirable, but it was missing from his earlier presentation to the House. He shakes his head, but we all have a chance to examine his contribution. We shall see what part of his speech made the case for regulation. That was not something that I heard him say.
The point applies particularly at the EU level. The telecommunications market has been opened up since 1998 because of European law making. I know that the right hon. Gentleman is rightly a strong supporter of the single market, and it has added huge amounts to European GDP and massive amounts to British GDP. Those reforms came about because the EU regulated, and not because it sat back and said, "No, we are not going to regulate." As my hon. Friend Ed Balls said, there is a balance to be struck in all these things. The balance was absent from the right hon. Gentleman's remarks.
I am afraid that I am going to have to say to the right hon. Gentleman and his hon. Friends that the House is entitled to treat his remarks tonight with a healthy dose of scepticism. His analysis is flawed, his facts are highly selective, and his prospectus would make matters worse not better. In short, he did not have a sensible strategy at all. Happy-clappy rhetoric on the theme of deregulation may be his stock in trade, and it works well for him among Conservative Members, but it does not add up to a row of beans.
Since 1997, the Government have focused their approach on better regulation, rather than simply on deregulation. Our view is that effective and targeted regulation can play a vital role in improving standards in public services, correcting market failures, promoting competition, ensuring fairness at work and providing protection for consumers and the environment.
I am grateful to the right hon. Gentleman for his tolerance of interventions from both Conservative and Labour Members. I am not making a party political point, because I just want to ask him his view. Does he agree that the problem with the House of Commons is that, every time we sit here, we pass more rules and regulations? They then have to be enforced and, once they are enforced, that has a cost in terms of civil servants and officials. That cost goes on to tax and, more often than not, on to the council tax. Does he agree that, because there is a House of Commons that passes laws, we are going to pass more rules and regulations that have to be enforced and then paid for by the consumer?
We have to balance all the competing pressures. The hon. Gentleman, for whom I have a lot of respect, would I am sure be the first to recognise that there are areas where it is right for the House to pass law. He is not simply saying that we should hang up our boots and go home.
The hon. Gentleman clearly is not saying that, but he raises an important wider issue. It is true that there is no such thing as free regulation. If we are going to regulate and impose burdens or costs on business, administrative burdens on citizens or whatever the agenda is, it is essential that we do so in the light of the best possible information about the costs. We have options and choices to make, and citizens and businesses have too. I agree, in part, that we need to improve the way that we discuss in the House and outside with business, citizens' groups and others the options in front of us and the costs of taking particular measures. We have been trying to do that and, to be fair to the hon. Gentleman's Government, they were keen to try to develop that as well.
If the hon. Gentleman will forgive me, I must now get on. I am conscious that other people wish to speak and, sadly, I am only half way through my speech. I had better make progress.
It is for some of the reasons that I outlined some time ago that we are not going to apologise to the House or to the British people for introducing the first ever national minimum wage, which has raised the incomes of more than 1 million people in poverty. Nor are we going to say that it was the wrong thing to do to introduce new rights to paid holidays and improved maternity and paternity arrangements. Those are important social advances.
We are proud that regulation in the UK has helped to secure an excellent health and safety record, with workplace fatalities cut by about two thirds since the 1970s. More employment rights for parents, clearer health warnings on food and tobacco and a cleaner environment are all important and worthy objectives for us to pursue. The argument is not whether we should pursue them, but how.
When we decide to regulate, we should try to do so proportionately on the basis of evidence and only if the benefits of regulating clearly justify the inevitable costs to which the hon. Member for Totnes referred.
We are not concerned solely with improving new legislation, but with simplifying existing legislation. We are stripping away regulatory burdens on business whenever possible. For example, we have implemented more than 400 deregulatory measures in the Government's regulatory reform action plan, which was published in December 2003. Good examples of those are measures relating to reform of the fire safety laws, which will save businesses literally hundreds of millions of pounds over the next 10 years.
We have raised the audit threshold for small businesses, which has exempted nearly 900,000 companies from onerous audit requirements and thus saved them at least £94 million a year. We have provided the highest VAT thresholds in Europe and reduced administrative costs for 500,000 of the smallest companies in the UK as a result. We have also committed ourselves to reducing £1 billion of the regulatory burdens on business arising from Department of Trade and Industry regulations over the lifetime of the DTI's five-year programme. We have reduced the payroll burdens for 1.2 million businesses by paying working tax credit direct to individuals rather than via employers—[Interruption.] Mr. Willetts will get his chance later and I am sure that we all look forward to that.
We are providing better, clearer information for business on regulatory changes, including, for example, the introduction of new common commencement dates so that all employment law changes now start on two days of the year. Business asked us to do that and we responded positively.
I hope that I can reach out to the right hon. Member for Wokingham because I accept that the Government should be doing more. We have signalled our intention to do more by accepting the recommendations of the Arculus and Hampton reports, although he did not refer to them in his speech, and by setting out a clear programme for regulatory reform at the European Union level, which he accused us of failing to do.
Altogether that adds up to the most radical regulatory reform programme under way anywhere in the developed world. It has been welcomed by business leaders, who have expressed their support for the direction of travel that we have set out. The policies are designed to reduce the costs of compliance, to strip away unnecessary and outdated regulation and to simplify the existing body of legislation so that those who are required to observe such laws have a better understanding of what they need to do. They will also address a further concern that business has expressed to us because they will fundamentally change the way in which bodies that are charged with inspection and enforcement set about their work. We will move to a more risk-based approach on regulation and inspection, with fewer inspectorates co-ordinating their work more efficiently and effectively. Their work will be focused on companies with a poor track record of compliance, so companies with a good record will be left to get on and run their businesses.
The motion calls on the Government to introduce new legislation to give effect to those principles, so I am pleased to be able to remind the right hon. Gentleman that we will do precisely that during this Session. I look forward to him joining us in the Lobby when the Bill is introduced in the new year, but sadly I suspect that that might not happen.
Taken together, these radical reforms should ensure that each new major regulatory proposal will have to be accompanied by offsetting deregulatory proposals so that the relevant sectors do not experience excessive growth in the cumulative burden of the regulation affecting them. The administrative costs to business, which are important and need to be tackled, owing to the existing stock of regulations will be measured. That is the first step that we must take, although no Government have ever tried to do so, despite the right hon. Gentleman's warm words. Challenging targets must be set for the reduction of those costs. We will rationalise the structure of the independent regulatory bodies to make them more efficient and to spread best practice, such as risk-based inspection. We will reduce the number of regulators that interact with business from the present number of 31 to seven, which will include consolidating several existing regulators into a new consumer and trading standards body.
In Europe, we will continue to drive forward the better regulation agenda. Better regulation will be a key theme of the UK presidency. On Friday, my right hon. Friends the Secretary of State for Trade and Industry and the Chief Secretary to the Treasury and I met EU Commissioners to set out the UK's priorities for better regulation during our presidency. Over the next six months, we will work hard to ensure that impact assessments are used fully by the institutions—they are not at present—and that Commission impact assessments are given proper consideration by the Council. We want to make progress on substantial measures to simplify existing laws and the Commission will make new proposals on that later in the autumn. We want to ensure that there is effective consultation with stakeholders, especially businesses in the European Union. The Commission should take such consultation into account when drafting new legislative proposals.
I am grateful to the right hon. Gentleman for giving way to me a second time. He did not really answer my question on agriculture and horticulture, so I shall let him have a go at fishing. By implication, he defended the common fisheries policy when he scorned my right hon. Friend Mr. Redwood. When he and his colleagues go to Europe, will they tackle the common fisheries policy, which has bizarrely and strangely led to a situation in which we have fewer fish and fishermen than when it was invented? What will he do for Britain's ailing fishing industry and how will he extricate us from the common fisheries policy, which has done so much damage?
I do not doubt that the common fisheries policy, like the common agricultural policy, could benefit from reform, and my right hon. Friend the Secretary of State has been successfully taking that forward. However, the right hon. Member for Wokingham talked about pulling out of the common fisheries policy, which could be done only by holding up one, if not two, fingers to the rest of the European Union. [Interruption.] Conservative Members are nodding because they want to do that, although those who have any sense will not be nodding because this is all about pulling out of the European Union. I think that Mr. Hayes is nodding, so he clearly wants us to come out, although no doubt other Conservative Members will now sit on their hands because they are not sure whether they should be going down that slippery slope. There are not many sensible Conservative Members left, but if the right hon. and learned Member for Rushcliffe were in the Chamber, I am sure that he would be putting the hon. Member for South Holland and The Deepings to rights much better than I could. That policy is preposterous and daft. It was conjured up to appeal to the populist right-wing media in the run-in to the election, but it once again bombed spectacularly for the Conservatives. I wonder whether they will ever wake up to the fact that their policy agenda of pulling Britain out of the European Union—it barely dares speak its name, but it comes out in these debates every now and again—is a recipe for complete economic and financial disaster.
The right hon. Member for Wokingham was talking about unilaterally pulling out of the common fisheries policy, but that is not compatible with our treaty of Rome obligations.
Delivering such changes will require a culture change across the institutions of Europe and it will take time to fully embed such better regulatory principles. However, by the time that we hand over to Austria at the end of this year, we intend to ensure that real progress has been made that will bring demonstrable benefits to European business and citizens.
The better regulation agenda is by no means confined to the impact of regulations on the private sector. I shall let the Under-Secretary of State for the Cabinet Office, my hon. Friend Mr. Murphy, deal in his winding-up speech with the points made about the public sector because it is now time for me to sit down. However, it is a travesty to traduce the facts and our policies by suggesting that the public services are now also drowning in a sea of red tape. Public service delivery is improving and the performance of schools and hospitals is getting better. The Government have a proud record of trying to strike the right balance between the things that they must do at the centre and the freedom and responsibility of professionals at the front line. It is worth reflecting on the fact that the first party to introduce central targets in the national health service was none other than our dear old friend the Conservative Government.
It is clear that this Government are delivering on their pledge to the people to create a competitive and dynamic enterprise economy and world-class public services of which individuals, communities and our country can be proud. All that has not been achieved by compromising health and safety standards, which the proposals of the right hon. Member for Wokingham would do, or by denying working people the right to a minimum wage, as some Conservative Members wish to do. We are trying to get the balance right.
I recognise that more can always be done to make our regulatory systems more effective. We are trying to do that. I have set out an ambitious programme of regulatory reform for this Parliament. It will better equip us to meet the challenges of the future. It is the right direction for our country to take. That is why I strongly invite my hon. Friends to support the amendment and reject the Opposition motion.
There is a contradiction at the heart of the Minister's speech. He spent most of the time talking about the Government's excellent record on regulation and then went on to suggest that they were about to embark on the "most radical reform programme" to deregulate. Proposing such a programme is a tacit admission that there is something wrong.
The motion is something of a scatter-gun in its approach, ranging from a call to the Government for proposals that free professionals in schools and hospitals, to the case for cutting controls over local government, and to measures that will allow business to compete with rivals in Asia and the US. I can just about see a common thread, and I accept that the motion raises serious issues. The sentiments it expresses are broadly shared by the Liberal Democrats, so we will support it.
The Government amendment smacks of complacency and endorses an approach by which schools, hospitals and councils have to win freedom from the control of central Government. We reject that approach. We will never break the dependency culture of an overcentralised state in that way. Their approach says, "You do precisely what we in central Government want you to do, and we will then give you strictly controlled limited freedoms." That earned autonomy is not localism as we understand it. We want a much greater, more genuine decentralisation of power.
On business regulation, it is worth reminding ourselves that a modern, well-functioning market economy depends for its success on the rule of law. The new democracies in eastern Europe, many of which have built remarkably successful economies, had to develop those rules quickly as they escaped from the clutches of communism. Rules are necessary in particular to safeguard and protect employees from unacceptable exploitation. It is worth remembering that Conservative Governments as well as Labour Governments have legislated to outlaw discrimination in the workplace.
The hon. Gentleman will know from his background what I am talking about. Did he find it extraordinary, as I did, that Mr. Redwood said that there was only one thing worse than having a regulated job and that was having no job at all? In fact, the worst thing of all is to be dead from work because there is no occupational health and safety legislation.
The hon. Gentleman reinforces the point that some regulation is necessary to safeguard employees. It was Mr. Hague—a former leader of the Conservative party—who took the Disability Discrimination Act 1995 through Parliament. It imposes a considerable additional regulatory burden on business. In my former life as an employment lawyer, I received plenty of money from businesses seeking advice on how to implement that Conservative legislation, which increased the burden on business. But surely we are not arguing that the framework of that legislation—the protection that it gave to disabled people—is wrong. It may well be possible to simplify the rules for the benefit of both the citizen and the employer, but the case for regulation in that sphere is surely not seriously challenged.
The hon. Gentleman knows that the 1995 Act asked businesses to make reasonable adjustments, thereby ensuring that small businesses were not disadvantaged by a huge regulatory burden. Does he accept that an awful lot of the regulations that come from the Government apply equally to small and large businesses? Small businesses create the vast majority of employment wealth in the country and are most disadvantaged by all the regulation. It is the small businesses that struggle. The Minister is obsessed with business leaders and dazed by big business all the time.
The hon. Gentleman is right to address the concern that small businesses can be heavily burdened by regulation from the Government, but we must remember that an employee's safety is as important if they work for a small business as it is if they work for a large business. Again, it is a matter of striking the right balance. I accept that the "reasonable adjustments" enabled the size and scope of the business to be taken into account, but the extent of guidance provided with the 1995 Act effectively imposed a massive additional burden on businesses of all sizes. I was simply giving an example of a Conservative Government increasing the regulatory burden to give protection to disabled people, which we should all support.
I promise that this is my last contribution to our debate. The hon. Gentleman surprised all the Labour Members in the Chamber by saying that he is going to support the Conservative motion. I checked his manifesto, but I could not find a single reference to regulation, so he is obviously borrowing Conservative policies. Can he confirm that in his new-found support for better regulation he is abandoning the Liberal Democrat plans to introduce dog licences again, which is the most absurd regulatory burden that anyone has devised for a long time?
I note the contribution by Rob Marris, but I confess that I am not a great enthusiast for dog licences.
Another example of regulation that provides important protection for employees is the minimum wage legislation. Ed Balls challenged Mr. Redwood to say whether he supported the minimum wage. We did not receive an answer to that question. Assessments of the total cost of regulation on business, estimated to be about £40 billion by the British Chambers of Commerce, attribute about £13.5 billion to the minimum wage, yet there is now widespread support, even within the Conservative party, for the principle of the minimum wage. Many people would argue that it has improved the labour market and pushed companies higher up the value chain, so it is another example of regulation that protects employees and is regarded as beneficial.
Rules or regulations are necessary to protect consumers; to ensure that companies do not exploit monopoly positions and to make them behave properly, through prudential financial controls, for example; and to ensure that consumers can make informed choices. Regulation to protect the consumer is going through Parliament at the moment. There is argument about some important details in the Consumer Credit Bill but, even though it increases regulation on business, it is broadly supported by the Conservative party as well as by the Liberal Democrats. Finally, rules and regulations are necessary to protect the environment. The market does not understand the imperative of tackling global warming, so a mixture of regulation and other market-based mechanisms such as emissions trading are necessary to change corporate behaviour.
We should avoid the temptation to condemn all regulations or rules. Some Tories rail against the very idea of business regulation, but our attack must be targeted on excessive regulation or regulation that is disproportionate to the mischief or problem; well-intentioned regulation that has unintended consequences; and regulation that addresses an important issue in a bureaucratic and burdensome way. For example, to a provide a framework of protection against various forms of discrimination, this country, with the help of the European Union—I am sure the right hon. Member for Wokingham would agree—has developed myriad rules on discrimination that are so detailed and complex that they fail adequately to protect the citizen. They are quite impenetrable to many people, and leave most businesses unaware of the extent of their responsibilities.
The answer is a single equality Act, as proposed by the Liberal Democrat peer Lord Lester. That reform would be a significant deregulatory measure, and it is frustrating that the Government have not acted on the proposal. The case for it is overwhelming: we could remove a vast quantity of regulation and rules on discrimination and replace them with a much simpler framework. It is not just regulation that we need to address: there is a great danger of regarding deregulation as a panacea. Indeed, the motion concludes that deregulation and better regulation would
"allow business in the UK to compete more successfully against Asian and American competitors."
They could, but that is not enough on its own. The recent unanimous report of the Trade and Industry Committee concluded that
"the main challenges that the UK economy faces are not exclusively matters of regulation or deregulation, but in areas . . . including skills and training, R and D, and technology transfer, the supply of capital for investment, and narrowing the productivity gap with our competitors."
None of that detracts from the fact that the regulatory burden has grown dramatically and excessively, and that that trend goes back well before 1997.
The Government are right to point out in their amendment that in some respects the UK is seen as a leader in regulatory reform, certainly in the European context. The United States started a much more systematic analysis of Government regulation back in 1993 under President Clinton, but, ahead of much of the European field, with the clear exception of Holland, the UK has developed the concept of the regulatory impact assessment, with which the Minister dealt in his speech. The problem is that in our view it does not work as intended. I list some of the criticisms.
First, the Government have all too often failed to follow their own rules when preparing regulatory impact assessments. Secondly, the RIA is carried out by the Department that seeks to implement the regulation. There is a danger that it will simply be self-serving. No outside body reviews the RIA once it is prepared. The National Audit Office may look at it after the event, but there is no independence in the process.
Thirdly, by the time the RIA is carried out, the momentum to introduce the measure is often unstoppable. It happens too late in the process. Are we ever told, for example, that an RIA has resulted in the decision not to proceed with a new regulation? One suspicion is that that never happens. I would be interested to hear from the Minister whether there are ever occasions when RIAs reach a conclusion that a regulation should not proceed. We are never made aware of that.
Fourthly, the assessment of impact on business is often insufficiently robust and there is no standard process for revisiting the regulation once it has been in force for a time to measure its actual impact and to compare the reality with what had been predicted in the original RIA. Fifthly, there is insufficient transparency in the process. It is impossible to determine how the costing has worked and who has been consulted. Sixthly, and perhaps above all else, there has not been a sufficient cultural shift in Whitehall Departments. The pressure is still to regulate, rather than to make a genuine attempt to examine all other options for resolving a problem without resorting to regulation.
I suggest the following steps to help change the culture and slow the pace of new regulation. To start with, there should be some independence in the regulatory impact assessment process. It could involve an independent body conducting the assessment, or an independent assessment panel of suitably qualified individuals looking at the RIA once it had been prepared. The panel's conclusion would be available to Parliament before it considered the measure. This element of independence would focus the minds of civil servants and would be likely to act as a constraint on the flow of new regulation. It is an approach pioneered in the Netherlands with marked success.
Secondly, there must be much more effective assessment of impact. That would necessarily involve industry bodies more effectively in determining the likely cost of regulating, and also in examining whether there are alternative ways to proceed that would be more cost effective. Thirdly, there must be transparency in the process. Information, including the method of calculating the impact and all other background material, should be routinely published on the Department's website.
Fourthly, there must be a post-implementation assessment of each new regulation, perhaps three years after enactment. That could be carried out by the independent assessment panel that I proposed.
Finally, each regulation affecting business should include a sunset clause, which would force a further assessment of its worth. If the Government wanted the regulation to survive, they would have to justify it again to Parliament.
So far I have dealt only with Whitehall. The process at European Union level is less advanced and even more disturbing. The flow of new regulations, directives and other EU decisions has grown massively over the years, peaking in 1998 at 3,901—more than 10 a day. By 2003, the number had declined somewhat, but still it reached more than 3,400. We now have a European RIA of new regulations but it is rightly criticised for lack of rigour. A survey of a sample of EIAs, as they have become known, found that only half had quantified both costs and benefits. Too often they are nothing more than a flimsy paper exercise. The British Chambers of Commerce has found in a sample that 10 out of 12 UK EIAs carried out in respect of EU regulations were published after the regulations had come into force, thereby negating the entire purpose of the assessment.
All the proposals that I have put forward for the UK could be applied equally to the EU. I welcome the fact that the Cabinet Office has apparently today reasserted the Government's commitment to deregulation as a priority for the UK's EU presidency. Interestingly, it was reported in the Financial Times this morning that Ministers will advocate a new independent body to scrutinise proposals for regulation. If independence is appropriate for the EU, presumably it is appropriate also at national level.
There is an added dimension to the European level of regulation that merits consideration. Tim Ambler of the London Business School has highlighted that directives provide scope for interpretation at national level. Each member state can implement a directive in its own way. The process provides the opportunity for so-called gold-plating.
Logic suggests that if the measure is required at EU level, it should be implemented uniformly throughout the single market. That suggests that it should be implemented in a regulation that applies directly and does not involve any further regulation at national level, or it should be left to member states to decide whether to legislate. Going down the directive route inevitably involves legislation both at European level and member state level, leaving confusion throughout the EU and also leaving businesses and individuals unclear as to their rights. Tim Ambler highlights the risk of legislating at multiple levels of government, which ensures that there is a lack of clarity. That leaves the citizen entirely confused.
As well as being far more robust in our examination of regulatory proposals, we must seek to reduce existing regulation. Both at national and European levels there is a need to tackle the vast accumulation of regulation. There must be a rigorous approach to reducing and simplifying the burden, and the Dutch have again taken the lead. The Government have stated their objectives and they will be judged against their rhetoric. One approach that is worth considering is the one in, one out discipline. Every time a Department seeks to impose a new regulation, it would have to propose the cull of an existing one. The concept that the regulatory burden has grown large enough and that something must give to facilitate the introduction of a new regulation is logical and attractive.
The Government have committed themselves to the rationalisation of compliance and of the enforcement regime. They talk about fewer inspections, especially where companies have a good record of compliance. If it happens, it should be welcomed. So far, delivery has not matched rhetoric. The burden on small businesses must be considered much further. The idea proposed that they should deal with only one official merits consideration.
The motion deals with the burden on local government, schools and hospitals. Just as companies are more likely to prosper if they have the burden of excessive centrally imposed regulation removed from them so local government could come alive again if it were liberated from central controls. The UK tops the league table for the proportion of taxes that are raised centrally, and that is combined with a denial of local autonomy.
Last year, the Treasury Committee visited North Carolina. We were examining how productivity had been improved in that state. Inevitably, education and training were central to the strategy that had been pursued. That state decided that it wanted to embark on a massive rebuilding programme to upgrade schools and colleges, put a proposition on the ballot paper for the state elections, and won overwhelming approval for the issue of a bond to raise the money.
No such autonomy is available in this country. We have developed a dependency culture that enables local government always to blame central Government whenever it runs out of cash or is prevented from doing something. [Interruption.] The hon. Member for Wolverhampton, South-West should listen instead of sniping at the Liberal Democrats.
Every Liberal Democrat local government "Focus" leaflet that I have seen—although I have by no means seen them all—takes a swing at central Government for insufficient funding.
I am pleased that the hon. Gentleman endorses the point I am making.
It is surely much better to make local government genuinely more accountable to its electorate. Under our system, whereby central Government controls everything, there is a dependency culture that enables local councils and local politicians to blame central Government for everything. If we had a system with genuine local autonomy and accountability, the buck would stop with the local authority and the system would be much better for it.
The same principles apply to health and education services, which are constantly dragged down by a centralised Whitehall target-setting agenda whereby the instinct is to micro-manage everything from London. I was struck by a comment from a hospital manager who told me that he and his colleagues not only have to account to the Department of Health through all the performance measures that are imposed on them, but have the Prime Minister's delivery unit on their back as well. Two departments of central Government are looking at every move they make.
The common thread running through all this is the emergence of a state where the centre seeks to control everything. The intention is often, but not always, laudable—identity cards being one example where the intention is clearly not laudable. However, the law of unintended consequences means that whether for entrepreneurs, local authorities, schools or hospitals, the spirit is too often dulled or destroyed by an overbearing state.
Order. I remind the House that Mr. Speaker has placed a 12-minute limit on Back-Bench speeches. There is not a lot of time left, and hon. Members will help each other if they are able to keep comfortably within that limit.
I was interested to hear Mr. Redwood give an analysis of local authority administration. I should like to draw his and the House's attention to the activities of two neighbouring councils in Scotland. Perth and Kinross council, which strangely enough is controlled by the Liberal Democrats and the Scottish National party, sought public liability insurance for a G8 alternatives demonstration this week, only to withdraw the requirement two weeks later. Stirling council, which is Labour controlled, agreed the site for a G8 alternatives eco-village with the appropriate level of guarantees but without the need to back-pedal from a situation that it had itself created. That is a good comparative example of how councils are in control of making their own decisions without intervention from central Government.
I welcome the Government's commitment to dealing with the burden of unnecessary regulation on businesses and public sector providers. I must declare an interest, as stated in the Register, in that I run a building supplies business in Scotland. Coming to this House with a business background, I understand that unnecessary regulation on business and public services can hold back enterprise and stifle ambition. The burden of paperwork ensuring that companies conform to regulations from Westminster and Brussels can take a considerable time to complete and, as such, has an impact on the time management of employees and directors alike.
This is not, however, a new phenomenon. Having been involved in the building trade for more than 25 years, I have noted that red tape has always placed a burden on companies and employees. The Government's ambitions here and now represent a real attempt to change the culture that exists within Government, which often creates needless administrative processes for companies and sometimes holds back the development of smaller companies. The Government's desire to remove unnecessary regulations while maintaining the benefits of many existing regulations makes their aim stand out from the Opposition's.Good regulation has provided protection for employees and consumers. It has ensured that standards are kept high and that health and safety is maintained. As we heard earlier, the UK is recognised world wide as a leader in regulatory reform. As our economic prosperity shows, we can ensure that those reforms add to our international standing.
Good regulation can, often does and should always impact positively on the business sector, leading to improved working environments, growing output and improved financial performance. The reason for better regulation is clear. We will experience not only the benefits of freeing up employee time but financial benefits for businesses. I am sure that many of my hon. Friends have seen the estimation that by implementing changes to such regulations we can increase British prosperity and productivity by approximately £20 billion.
Similarly, the removal of some regulations and paperwork in the public services will free up time for public service employees, allowing them to focus more on the provision of their specific service and improve efficiency. However, that must neither be done through the removal of standards by simply erasing the regulations as Conservative Members wish, nor by compromising key reforms such as increased paid holiday for part-time workers, increased maternity and paternity rights or the minimum wage, which Conservative Members found they did not have the time to support when it was introduced.
A different approach to inspection is also required. A large proportion of the forms that businesses must complete results from the many inspections to which they are subject. Adapting the process whereby inspections are made so that companies do not face unnecessary repeat inspections will cut down the burden that that places not only on companies but on the bodies conducting the inspections. That will free up time for inspectorates, allowing them the opportunity to perform more thorough inspections and potentially allowing an opportunity to review the necessity for some inspectorates.
Does the hon. Gentleman agree that there is an imbalance in some Departments between authority and accountability? For example, let us consider the inspection regime of the Health and Safety Executive, which can rightly force a change in working practice in a business. However, if an accident subsequently occurs, the burden falls on the employer and the HSE will walk away, even though it forced the change in working practice.
I shall deal with the effect in various Departments shortly.
Adapting the process whereby inspections are made so that companies do not face unnecessary repeat inspections will free up time. My right hon. Friend the Chancellor clearly demonstrated his commitment in the Budget, and Departments will be challenged to simplify and reduce regulations. The move to a more intelligent, risk-based approach will be good for most businesses, which will experience a lightening of their load. By reducing the number of inspectors who deal with business from 29 to seven and those who deal with public services from 11 to four, businesses, the public sector and the inspectorates will all become more efficient.We are beginning to experience improvements in Departments; for example, the Department for Environment, Food and Rural Affairs has committed itself to reducing its administrative burden by 25 per cent. Other Departments are working on similar plans.
Cutting the amount of inspections could be complemented by discussions in the EU on the need for better regulation both in and from the EU. I am confident that the Government's ministerial team will deal with that European burden. I hope that they will perhaps use the UK presidency to push for an agenda for change on that.
I understand that there are plans to introduce a Bill on better regulation and that it will try to remove outdated and unnecessary legislation. At the same time, we must introduce tougher penalties for businesses that do not comply with the remaining regulations. Removing the burden of some red tape will assist some companies, but it may also encourage others to risk non-compliance. That should carry a penalty that is sufficiently severe to deter the said business from taking such avoiding action.
I applaud the Government's aim to reduce regulations, but I would ask the ministerial team involved to provide a mechanism whereby those businesses that wish to comply can get easier access to a basic level of information, possibly even sector by sector and through developing technologies. That would make it easier for businesses, especially small businesses, to comply. We want our business leaders to develop their businesses and to be able to face the challenges of an ever-changing world. The Government's proposals are very useful in that regard, but we can always do more to help, and I hope that the Ministers will feel able to include such measures in any legislation they introduce.
First, I should like to declare my interests, which are in the register.
Gordon Banks is obviously a worthy successor to his predecessor, who was a superb Chairman of the Trade and Industry Committee. The hon. Gentleman's business interests and experience will stand him in good stead in following in the footsteps of his predecessor, who is now a Member of the other place. We look forward to hearing from the hon. Gentleman again on matters to do with industry, business and regulation.
I concluded, as I am sure many of my hon. colleagues did, that the speech made by the Minister of Communities and Local Government was extremely complacent. He flagged up the areas in which the economy was doing well—yes, we do have low unemployment and reasonable economic growth—but he said nothing about the loss of manufacturing jobs when he was challenged to do so by my right hon. Friend Mr. Redwood. He did not say anything about the balance of payments, the record UK trade deficit, or the fall in our productivity. Nor did he say anything about the offshoring of manufacturing jobs. He did not mention, for example, the fact that Sony has recently announced that it is to move a lot of its jobs in Bridgend offshore from this country.
The Minister did not say very much about our loss of competitive position, which is very serious indeed. My right hon. Friend the Member for Wokingham mentioned the fact that we have fallen in the World Economic Forum's league rankings from fourth position in 1998 to 14th position today. That is very worrying indeed. The Minister said that we were doing better than countries such as France, Spain and Italy, but they are not even in the first 20 in those rankings. The point is that we are way behind the USA, Singapore, Australia, Norway, Japan and some of the smaller European countries.
No, I will not; time is restricted.
The Minister should take on board the fact that the overall picture is far from rosy. The problem is that we are undermining many of the important supply-side reforms that took place in the 1980s and 1990s. That matters, and we have fallen in the league of world competitive rankings entirely as a result of excessive regulation and red tape. That observation is backed up by every independent commentator, including the CBI, the Institute of Directors, the Engineering Employers Federation, the British Chambers of Commerce, the Federation of Small Businesses and the Forum of Private Business. When describing the level of regulation that had been put on business, my right hon. Friend the Member for Wokingham mentioned a figure of £40 billion-plus since 1998. In fact, the CBI's figures are worse, because they show that the annual level of increase is £6 billion. That obviously works out at an even more worrying figure.
In the few brief moments available to me, I should like to examine some of the drivers of regulation, and to work out what we could do to reverse them. One of the main drivers is undoubtedly the European Union, which is responsible for roughly 40 per cent. of all the regulations affecting industry and business in this country. As my right hon. Friend pointed out, we should not just sit back and take every one of those EU directives on the chin. When the Conservatives were in government, we had an opt-out from the social chapter.
The Prime Minister may talk about the deficiencies of the European business and social model, rail against some of the directives coming down the track, and complain bitterly about the agency workers directive, but we are completely powerless to do anything about it. We can argue our corner, but because we are signed up to the social chapter, we have no right of veto—we have to implement whatever the directives require. We have no flexibility whatever. Therefore what the Prime Minister says about the deficiencies of the EU social model, and the need to move closer to the American model with a free market economy, will mean nothing unless we can get back an opt-out from the social chapter. It was claimed that that was impossible, that we would have to renegotiate various treaties and use our bargaining position, and that it would be completely unfeasible. How negative is that? If we go in with that attitude, of course we will not make progress. The Government have made it clear that they are not interested in changing anything for the better.
The second driver of excess regulation, as I see it, is gold-plating—that peculiar British habit and tradition of extending the scope of directives, not taking advantage of derogations that might be on offer, and providing much tougher sanctions than demanded by the directive. There are many examples of that, but I will give just one, which I examined when I dealt with employment matters from the Front Bench in the previous Parliament—the EU part-time workers regulations, implemented through a statutory instrument in 2000. The EU directive stated that part-time workers must have the same rights as full-time employees, but left member states to decide how to implement the requirement. The UK regulations, however, included a provision that UK firms must issue any part-time employee who queried their terms and conditions with a written statement setting out all the reasons within 14 days—a much more onerous provision than in any other EU country. No wonder the British Chambers of Commerce argued that that was a classic case of gold-plating. Until we get a grip of this peculiar UK phenomenon, we will not significantly improve the situation in terms of excessive regulations.
Obviously, the third driver is Her Majesty's Government. All Opposition Members know that they have interfered and deliberately over-regulated. For example, Employment Act after Employment Act has put more burdens on business, escalating central control and intervening the whole time. In many areas, the Government have gratuitously and unnecessarily placed extra burdens on business.
That goes hand in hand with what I have described as the fourth driver of excessive regulation—administrative creep, or the extent to which government has grown in size. As my hon. Friend Mr. Willetts has pointed out many times, the bigger government becomes, the greater the propensity to regulate and interfere. I find the sheer extent of that growth very worrying and disturbing. One of the statistics that the Chancellor of the Duchy of Lancaster did not mention was the change in central Government employment since 1997. He talked about how well the economy was going, and how unemployment had fallen, but he did not mention the 1 million job losses in manufacturing. Obviously, they have been compensated for by the huge increase in jobs in central Government. One would have hoped that Britain would be at the forefront of trying to drive forward wealth creation, but while central Government employment has fallen by roughly 8 per cent. in countries such as France, Germany, Sweden, New Zealand and Italy since 1997, the UK lies in second place in the Organisation for Economic Co-operation and Development world chart, with an increase of 8 per cent. Of course we need more doctors, teachers and nurses, but we do not need all these people interfering.
One example of that is the Department of Trade and Industry. Many of the great industries have been transferred out of the state sector into the private sector. One would have expected the DTI to become smaller. Far from it: its budget has risen from £2.7 billion in 1998 to £5.2 billion in 2005–06, and the number of civil servants and other employees has almost doubled.
Nothing that we heard from the Minister will do anything about those drivers. We heard nothing from him about how the compensation culture will be dealt with. We heard nothing about the huge extra burden imposed on businesses by the increase in insurance premiums, and nothing about the time and effort that businesses must now devote to employment tribunals in an attempt to combat that compensation culture. Unless we can change attitudes in Whitehall and reverse the "big government" process which means more interference and more regulation, we will not be serious about deregulation, wealth creation and encouraging entrepreneurs.
In today's Daily Telegraph, the new Minister for Industry and the Regions, Alun Michael—he will deal with small businesses and enterprise—went on about wealth creation and the importance of helping small businesses. Unless we have a serious policy to reverse the drivers of regulation, and unless we give serious consideration to measures such as those in my party's manifesto, which refers to a really tough, imaginative deregulation Bill, everything that the Government say—although it may be well intentioned and entirely genuine—will have very little impact on the ground.
I wait with bated breath to hear the Minister's winding-up speech, which I hope will give us some hope that the Government will act. Judging by what his colleague said earlier, however, I am not particularly optimistic.
Before I came to the House, I was fortunate enough to do a job that I loved. I was a lecturer at Cranfield School of Management. Over the past seven years I have helped scores of my students to start their own businesses, and have helped scores of entrepreneurs to enable their businesses to grow profitably. The businesses range from Moonpig.com, an online greetings card business, to Real Burger World, a slow-food burger company in south London which I heartily recommend to Members. I also advised many companies whose representatives took advantage of Cranfield's business growth programme. When I talked to those people I heard many complaints about cash flow, about late payments from suppliers and customers, and about the difficulty of growing a business while keeping it profitable.
Better regulation was not the subject of the biggest or the most important complaints. My students came from all over the world. Many chose to start their businesses in Britain rather than in their home countries because our barriers to start-up are among the lowest in the world. Being an academic, I did not rely on my own words. I showed the students reports from the Organisation for Economic Co-operation and Development to prove my point that our low-regulation environment would prove helpful to them.
Britain is also attractive to companies starting their businesses because of our relatively well-developed venture capital markets, both the private-equity and the more formal markets. It is time-consuming for companies to find private equity, but it is easier here than it is in other European countries. Our banking sector is more competitive than those in other countries. Owner-managers often told me that what mattered most to their businesses was a sympathetic bank manager—or finding one after disposing of an unsympathetic bank manager.
We have heard a good deal about small businesses today. They are the engines of innovation in our economy. When I worked in a high-tech university, I saw how the teaching company scheme—later rebadged as the knowledge transfer partnerships—enabled universities and businesses to spin out new technologies and help the country to innovate. Under this Labour Government, the science budget for biotechnology and nanotechnology is nearly £3 billion, compared with a meagre £1.3 billion in 1997.
Fostering an enterprise culture is vital to Britain's economy. In my constituency we have a healthy mix of large and small companies, and unemployment is at a record low at 2.5 per cent. Businesses are enjoying business rate relief. Rural businesses are enjoying rate relief of up to 100 per cent. in villages containing fewer than 3,000 people. Many of them are enjoying 100 per cent. tax write-offs for their investment in new technologies, in research and development and in computers.
The enterprise culture that we have heard so much about is flourishing—at the moment—but regulatory reform should always remain a goal of any Government. Such reform should have clear public policy goals. It should allow small businesses to compete effectively against large companies, and allow them to compete for public contracts; we in this country have not always been successful in that regard. Such reform should also ensure that smaller and larger companies have equal access to finance. However, it should also remember that business takes place in society; that the environment should not be polluted; that fly-tipping instead of paying for waste disposal is a crime; that employees should have training in machinery and health and safety; and that no construction project or "dream building" is worth the life of a worker who is killed or crushed by machinery. One person's "regulation" is another's health and safety.
Regulatory reform in the UK must take into account three issues. First, we must ensure that regulations coming from the EU do not have a disproportionate impact on our small businesses, an issue about which we have heard a lot this evening. I am delighted that one of our priorities for the EU presidency is to lead the way on better regulation, and to ensure that fewer regulations come from Brussels. We have been successful in taking that message to other European countries, and there is a willingness to learn and to share our experience. But I also welcome legislation from Europe that helps our small businesses to compete better in a global marketplace. In an increasingly integrated world, we must ensure that our small businesses can grow internationally, as well as nationally.
The owner-manager of one of the small businesses that I used to deal with ran a container business. A change in EU regulation meant that for a short time, his was one of the few companies in the UK—indeed, in Europe—producing EU-compliant oil drums. That was clearly wonderful news for his business, because for a short while he was able to enjoy that rare thing that most businesses dream of—a monopoly. In our efforts to make the best, most environmentally friendly products in Europe, legislation can in fact act as a market opportunity, in which our world-class businesses can compete and thrive. Indeed, Mr. Redwood told us how telecoms benefited from the opening up of EU markets in 1998.
Secondly, if we are to achieve better regulation, regulatory reform must try to simplify existing regulation. The March 2005 Budget included a radical overhaul of regulation. We have heard about the twin-track process—one in, one out—whereby any legislation that imposes regulation is accompanied by a compensatory measure to simplify legislation.
Thirdly, we must reduce the burden of inspection across all services and businesses, public and private. I am very glad that our excellent councils are being relieved of some of the comprehensive performance assessment inspections to which they have been subjected. A risk-based approach to inspection means lighter inspection for businesses with a proven track record, and a heavier regime for those that continually fail to meet social, environmental or regulatory standards. That is not bad for business; it is good for society and it is good for good businesses.
Let me return to the companies that I spoke to in my seven years helping people to start their own businesses. They all told me that the most important thing that a Government can do for them is to keep interest rates low and to keep their borrowings down. They remembered the banks knocking on their doors in 1991, when interest rates hit 10 per cent. and peaked at 15 per cent. They remembered 1992 to 1996, when 1,000 businesses a week went bust. They do not want a return to Tory boom and bust, to
"15 per cent. interest rates, sky-high mortgage arrears, negative equity, bankruptcies, entrepreneurs giving up the ghost on private-run companies and a lot of people losing their jobs. I don't think there was a family in the country that didn't experience at least one of those anguishes."
So said the right hon. Member for Wokingham in a speech to the Bow Group on
Let us put regulation in its place; it serves us, not the other way round. Small businesses are run by human beings with families who understand the pressures of the modern world. When the Government were introducing maternity rights, one owner-manager said to me, "All this talk about not employing pregnant women—I'd hire someone who was nine months' pregnant if she was the best person for the job." Small business owners live in the real world, and they want real-world solutions. They know that without maternity leave and without women having babies, they would have no customers for tomorrow's products and services, and no staff to make or market them.
There was much talk from Conservative Members to the effect that the minimum wage would cost British jobs, but they were wrong. Does giving new fathers two weeks off to learn how to change their baby's nappy mean the end of the business in which they work? Not if the business is any good. Does giving employees the right to take four weeks' paid holiday mean that companies will plunge into the red? Not if the business is any good. This is not bossiness gone mad, just good business.
I want better regulation and smarter regulation. Instead of seeing it as an added layer of bureaucracy, we should see it as a smarter way of working. The Government are trying and succeeding on deregulation. We have gone beyond exhortation. I welcome the measures that we have taken to boost this country's economy and productivity and to create a healthy, thriving small business sector.
I would like to thank Mary Creagh for her contribution. I felt that, with her experience of small business, she made some very sensible points, particularly about the need to strike a fair balance with regulation. Nevertheless, I would like to remind Labour Members of their 1997 manifesto commitment:
"We will not impose burdensome regulations on businesses, because we understand that successful businesses must keep costs down."
As we have heard from many Members this evening, earlier this year the British Chambers of Commerce published its latest findings, showing that the costs of new business regulations introduced since 1997 are now approaching £40 billion. That figure actually excludes the national minimum wage. It does not include it, as Norman Lamb claimed. Indeed, the CBI has said:
"The Government must stem the red tape tide and make the regulatory environment more business-friendly. There is a pressing need for regulations to be cut-back and simplified."
Nevertheless, the Government announced back in August 1998 that no policy proposal that had an impact on business, charities or voluntary bodies should be considered by Ministers without a regulatory impact assessment first being carried out.
While regulatory impact assessments are in theory required to estimate the costs and benefits of regulation, there is no indication in the Cabinet Office guidance notes that proposed regulations should be aborted if, as is increasingly the case, their costs to business are found to outweigh their benefits. Indeed, the British Chambers of Commerce found that 23 per cent. of the RIAs it sampled in 2002–03 did not even attempt to quantify costs to business, and that 71 per cent. did not quantify the benefits.
Another problem is that the scope of cost-benefit analysis carried out in regulatory impact assessments is drawn extremely widely. The former Cabinet Office Minister, now the Minister for Europe said that an RIA procedure
"requires the responsible Minister to certify that he or she is satisfied that the benefits of the proposed measure justify its costs. The Minister will consider the full range of benefits arising from the measure, including social, environmental and economic".—[Hansard, 22 July 2004; Vol. 424, c. 515W.]
However, there is no objective way of measuring social or environmental benefit. RIAs can easily be reduced to subjective impressions. Furthermore, there is little scrutiny of the extent to which the particular costs and benefits predicted by officials prove accurate, once regulation actually comes into force.
Professor Ambler and Francis Chittenden, who studied 165 of the 197 RIAs published between July 2002 and June 2003, found that
"in many cases completion of RIAs remains a bureaucratic task to be despatched with as little effort as possible."
That impression was reinforced by a Government special adviser, who told the Social Market Foundation's regulatory best practice group:
"It would not be far off the truth to say that" the Minister
"would hardly remember having seen" an RIA.
"They have never made any difference to our work—we've got commitments to discharge and we're not going to let procedure get in our way."
So far, approximately 1,100 regulatory impact assessments have been issued since their introduction in 1998. In his study on behalf of the British Chambers of Commerce, Professor Ambler notes that in:
"many cases regulation is transferring government's administrative and social policy onto industry. In other words, whether intentionally or not, many regulations act as a form of taxation."
A good example of that may be seen from the current proposal for the Inland Revenue to take on the role of calculating and paying statutory maternity pay, maternity allowance and statutory adoption pay. The partial RIA on that topic states that it will cost the Inland Revenue £55 million in one-off costs and £26 million a year in ongoing costs to take that work over from employers. Since employers are currently required to administer those payments on behalf of the Government, employers are effectively contributing a lump sum of £55 million plus £26 million per year to the Inland Revenue.
I would therefore draw the Minister's attention to some of the BCC's recommendations on ways to improve RIAs. First, a Minister agreeing to an RIA where the quantified benefits do not appear to exceed the costs should explain why, in his or her view, the RIA is justified none the less. Secondly, Ministers, when signing, should also certify that the RIA meets the Cabinet Office guidelines and justify those areas where it does not. Thirdly, where consultees provide estimates of costs and benefits, a summary of those figures should be reported in the RIA. If those figures differ significantly from the Department's own estimates, a review date should be set—it suggests within two years—to examine the actual costs and benefits, as the guidelines already suggest in all cases. If, on completion of the review, it becomes apparent that the costs of the regulation are not justified by the benefits, the regulation should be revised or repealed.
Fourthly, sunset clauses should be used, except where the Minister, when signing, explains why it would be inappropriate in a particular case.
Fifthly, the Better Regulation Executive should maintain an up-to-date database and website of all RIAs, which should be serial-numbered and linked to relevant documents.
Finally, the BRE should publish an annual report, audited by the National Audit Office, of the Government's regulatory performance and compliance. That report should include additional costs and benefits arising from major regulations that have a significant impact on society, the economy and the environment.
Overall, however, the real objective is the need to achieve a significant net reduction in the regulatory burden presently placed on business.
What every Government, including our own, have to realise is that it is no longer as easy to dictate to a whole industry or a market how they run their business, because, faced with unreasonable or excessive regulation, many can simply vote with their feet and relocate elsewhere. If consumers do not like the rules that the Government choose to impose on them, they can often easily avoid them by visiting a website based offshore or simply getting on a budget flight to a country where they are allowed to engage in the practice they want to. Legislators now have less power over our daily lives than they used to and Governments need to recognise that we live in a changed and globalised environment. That must affect how they design regulation, where they choose to regulate and where they acknowledge they should not.
Obviously, a degree of regulation is useful to ensure that markets work efficiently and consumers are protected, but it is clear from the debate that the Government have imposed an excessive amount of regulation. They are not solely responsible for the problems, because the EU is another cost driver. A range of international organisations, many of which are increasingly opaque and unaccountable, also shape regulation in this country, such as the Financial Action Task Force, the World Intellectual Property Organisation, the World Trade Organisation and the Bank for International Settlements. We need to look at how such organisations work to try to reduce the flow of regulation that we receive from them.
As we have heard, it is the natural instinct of a legislator to regulate. In a sense, that is what many people feel they are in this place to do, and we must produce a political counterweight to that instinct. With hindsight, when a risk emerges, no legislator wants to be part of the Government who failed to regulate it away, but we need to acknowledge that we cannot regulate away all risk and we should not try to do so. One problem is that the legislators who produce new laws do not have to foot the bill—it is not like advocating more public spending. The people who actually have to pay the bill for new regulation are businesses, their customers and their employees whose jobs are threatened.
I want to consider briefly some of the ways in which we might produce a genuine political counterweight to the urge to legislate. All Governments talk about deregulating but few deliver on it. As many speakers have said, we need to ensure that legislation is properly costed and that a proper cost-benefit impact assessment is made before the decision to legislate. We need to consider whether legislation is necessary or whether competition could provide an acceptable solution to the problem. Is there a real market failure and, if so, is legislation the best way to tackle it?
To make a reasoned judgment on those questions, we need serious, effective and sound regulatory impact assessments that provide a range of options. As we have heard, RIAs are too often bland, superficial and self-serving. It is vital that they present decision makers with various options—including that of no action at all—from better enforcement of existing rules to small-scale changes in the regulatory structure of significant new legislation. Options to exempt small businesses should always be considered but they are not a panacea for over-regulation, because jobs can be threatened by the over-regulation of large businesses, too.
When the National Audit Office looked at the RIAs produced by the Government, there was concern that only two in the sample contained a series of options for Ministers. We can contrast that with the situation in other countries. For example, in Australia, the assessment for the Fuel Quality Standards Bill included seven options and 40 pages of in-depth analysis. We need more research into standardising and strengthening the analysis of the decision on whether to regulate or legislate. We need more standardised and rigorous data collection.
The Treasury green book "Appraisal and Evaluation in Central Government" identified another problem:
"a systematic tendency for project appraisers to be overly optimistic".
That is classic Treasury understatement. There is perennially a bias in favour of an optimistic approach to the usefulness and effectiveness of regulation.
As well as improving the analysis of cost impact assessment, we need to increase the political weight behind it. Cost assessment should ideally be conducted by an agency that is independent of Government. Again, there are precedents overseas. In the Netherlands, such a model has been successfully pioneered.
Another option is to grant affected parties the right to challenge a piece of legislation in the courts if no proper cost-benefit analysis was conducted. That has worked well in the United States, where the courts have begun to strike down secondary legislation if it is not properly costed.
Above all, it is important that, when the House signs off a piece of legislation, we do not consider that our job is done. We should continue to assess and review whether the legislation should remain on the statute book, especially in the case of EU directives. There should be a built-in method of assessing whether they should remain. Ideally, almost all regulation should be subject to sunset clauses. There should be regular review of absent sunset clauses and of cost impacts to see whether the original problem has been solved or whether it could be dealt with by competition. We need to consider whether our existing law is still effective in solving the problem. The House should make such review a priority, as it is vital to securing both the competitiveness of our nation and our continuing prosperity.
We have heard Labour Members boast about the 2 million new jobs that have been created since 1997, and a number of Conservative Members have pointed out that many of those jobs were in the public sector. However, we should acknowledge that some of those jobs are in the private sector. Indeed, I come from one of the growth areas in the private sector: a few weeks ago, I worked as a lawyer specialising in financial services regulation, which is a booming part of the economy because of the ever-increasing rules and regulations applied by the Financial Services Authority. Even quite large and sophisticated financial services firms require assistance in dealing with the authorised persons regime, with money laundering, as we heard earlier, and with the whole application process—a welter and gamut of areas that require detailed technical assistance. I am afraid that that is not untypical and that the same thing could be said of a number of other parts of the economy.
Let us take the FSA as an example. A lot of the rhetoric that comes from the FSA is highly encouraging and welcome. It talks about a risk-based, principle-based approach, which is largely welcomed in the industry. However, what we often get with regulators and, I suspect, with the Government is that, while much of the rhetoric and intent is welcome, it does not work out in reality. Although the talk at senior level is of a risk-based approach, when it comes to transmitting that in practice, what we get is a much more rigid adherence to detailed rules—a box-ticking approach. That is what a lot of the industry finds.
I know from personal experience and from a study carried out by the Centre for Policy Studies that such things are common. It is no surprise, that even the Prime Minister recognises some of the difficulties with this specific issue. He says that
"something is seriously awry . . . when the Financial Services Authority . . . is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone".
Of course, that contrasts with the Chancellor's approach when he says that the FSA is a world-leading example of how to regulate financial services, but perhaps I shall leave that aside for a moment.
I quoted the speech that the Prime Minister gave to the Institute for Public Policy Research on
"So what to do? First, recognise the problem."
I should have thought that this evening provided an ideal opportunity for Labour Members to recognise the problem, but there is no sign of them doing so whatever. It is also worth pointing out that the Minister quoted a couple of senior Conservatives who, after leaving government, spoke about the difficulties of deregulation. It appears that the Prime Minister is even more advanced, because he has not yet left the Government, but already recognises the Government's difficulty in deregulating.
I shall move on to other areas. I referred to financial services and, of course, business regulation is a key aspect, but let us also consider local government. My constituency faces a specific health and safety problem with monuments in cemeteries. There is a legitimate health and safety issue with such monuments because some tragic incidents have occurred in recent years. However, a disproportionate approach appears to be applied by the Health and Safety Executive in requiring that every monument, even if only 18 in or 2 ft above the ground, must be rigorously tested and removed. That causes a great deal of concern for my constituents and a degree of sensitivity.
I also wish to touch briefly on the voluntary sector, which has not been referred to in the debate. I have spoken to charities in my constituency that find that they are losing volunteers because of the increased burden of bureaucracy. Volunteers are driven away by having to carry out risk assessments, the training requirements and the delays in charities being able to make use of them because of those requirements.
The Government must recognise a problem in this country with regulation. A remote Government set rules but, by the time they are transmitted, they cause enormous difficulties—be they in our public services, our voluntary sector or in business.
We have had a useful debate that was powerfully opened by my right hon. Friend Mr. Redwood and included valuable contributions from my hon. Friends the Members for North-West Norfolk (Mr. Bellingham), for Braintree (Mr. Newmark), for Chipping Barnet (Mrs. Villiers) and for South-West Hertfordshire (Mr. Gauke). They all spoke about the sheer frustration that so many business people and British citizens feel at the burden of regulation that they now face.
What a pity that the Chancellor of the Duchy of Lancaster just did not seem to be aware of the economic impact of the regulations that his Government are imposing. He gave a complacent account of the state of the British economy and seemed to fail to recognise the problem of regulation. All he needed to do was to read this morning's Financial Times, in which he would have found that Sir David Arculus—who is, after all, the head of the Government's own taskforce—estimates that the cost of regulation to the British economy is between 10 and 12 per cent. of GDP. That makes up to £150 billion of regulatory costs on the British economy. Of that, some is, of course, desirable or necessary regulation; we recognise that. However, on Sir David's estimate, one third is bad regulation. That means that £50 billion is the cost of bad regulation. That is the scale of the challenge that the adviser to the Chancellor of the Duchy of Lancaster set out. What a pity he did not seem to recognise it.
Many of us see at close hand in our constituencies the effects of some of the Government's ill-thought-out regulations. I think of the volunteer who helped to check the electric wiring at our local church hall. He will now have to pay an exorbitant price to be certified as a competent person to carry on doing something that he had been doing as a volunteer. I think of the money-laundering regulations that mean that people who want to start a small business and get on with creating wealth for our country have to spend weeks, if not months, presenting documents to a bank before they can even open a bank account. I think of the threat posed by the Licensing Act 2003 to our village halls and to many of our local charities. I think of the social hall attached to a firm in my constituency that previously paid £16 a year to be registered as a place where people could come and enjoy a pint and that is faced with a fixed charge of £1,000 and an annual payment of £300. Those are the burdens and human costs of the regulations that this Government have imposed, but one would not have believed it from anything that we heard from the Chancellor of the Duchy of Lancaster.
Ministers, of course, pledge to act—they always pledge to act. In fact, that is what they have said in successive manifestos. The Labour manifesto of 1997 said:
"We will cut unnecessary red tape".
The Labour manifesto of 2001 said:
"We will cut back the red tape associated with regulation".
Its manifesto of 2005 said that it
"will set exacting targets for reducing the costs of administering regulations."
That is what Labour always says, but it never does it. Meanwhile the burden of regulation gets heavier and heavier. All that we get are endless reports. In fact, Labour is so committed to cutting back the burden of bureaucracy and red tape that we got no fewer than two reports on the same day earlier this year about reducing the administrative burden and the amount of regulation. We have taskforces, we have panels, we have units, but we do not have action.
"delivering the commitments in the Regulatory Reform Action Plan, including over 60 Regulatory Reform Orders by 2005."
The Government set themselves the target of repealing and reversing 60 regulatory orders by 2005, but what happened? The score was a mere 25 orders, but they have got out of their manifest failure to meet that target by rewriting it, so the target is now 75 regulatory orders by 2008. That reflects their failure to tackle the problem.
The Government promised to introduce business planning zones. The Treasury document, "Enterprise Britain: a modern approach to meeting the enterprise challenge" said, under the heading "Regulatory reform":
"New planning reforms will allow local authorities to cut red tape for new and expanding businesses by removing the need to apply for planning permission in designated Business Planning Zones."
Three and a half years on, where are these designated business planning zones? They do not exist yet—not a single one has been created. The Government talk about things, but they do not do them.
We have a Ministerial Committee on Regulation, Bureaucracy and Risk. It even has a Sub-Committee: the Sub-Committee on the Panel on Regulatory Accountability. The Sub-Committee has the Prime Minister as Chair, but just in case he needs support, it has a joint Chair: the Chancellor of the Exchequer. In case the Chair and the joint Chair are not enough—after all, the Sub-Committee is supposed to be cutting back on bureaucracy—the Chancellor of the Duchy of Lancaster is the alternate Chair. The Sub-Committee is supposed to hold Departments' regulatory performance to account, but what has it done? What has it achieved and what has been delivered? Of course, very little has happened.
The Chancellor of the Duchy of Lancaster said that good progress has been made and that the measures that the Government have taken had been welcomed by business, but as my hon. Friend the Member for South-West Hertfordshire pointed out, that is not what the Prime Minister says. It was not what the Prime Minister said in his speech to the Institute for Public Policy Research on
"The result is a plethora of rules, guidelines, responses to 'scandals' of one nature or another that ends up having utterly perverse consequences."
Those words of the Prime Minister were very different from those that we heard today from the Chancellor of the Duchy of Lancaster.
The Prime Minister went on in that speech to describe some of the problems realistically. He spoke about the Financial Services Authority, which was established to provide clear guidelines and rules for the financial services sector and to protect the consumer against the fraudulent. He said that the FSA was
"seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone."
One wonders who introduced the FSA. Whose legislation was the Prime Minister so savagely attacking? He was attacking his own legislation. The body was his own creation and the Prime Minister knew that there was a problem because he went out of his way to attack his own policy.
Several of my hon. Friends have pointed out that the Prime Minister has talked frankly about the problems of EU regulation. In the same speech he said:
"About 50 per cent. of regulations with a significant impact on business now emanate from the EU."
Conservatives Members know that that is a problem. He went on to say:
"And it often seems to want to regulate too heavily without sufficient cause. The EU vitamins directive is a good example."
Conservative Members have regularly challenged the Prime Minister and the Government on the effect of the EU vitamins directive. It was no good him turning up to attack it last month because when he was asked about it by Conservative Members at Prime Minister's Question Time last December, he said:
"As ever, we must proceed according to the science, and the position set out by the Government is the one that I support."—[Hansard, 1 December 2004; Vol. 428, c. 633.]
He delivered a speech last month in which he attacked a regulation that he supported.
The Prime Minister went further in his speech by attacking other regulations. He said:
"A village in the Cotswolds was required to pull up a seesaw because it was judged a danger under an EU Directive on Playground Equipment for Outside Use. This was despite the fact that no accidents had occurred on it."
One might think that that powerful example of over-regulation was attributable to that EU directive. The only trouble is that there is no such EU directive on playground equipment for outside use. In fact, playgrounds are not regulated by the EU at all. No EU directive covers playgrounds. So we have a Prime Minister who turns up to announce that he is against red tape, who denounces his own legislation, who claims to agree with us on a directive that he has defended from the Dispatch Box, and who invents EU directives that he can then attack. He is not a very good chairman of this panel on regulatory bureaucracy if he knows so little about his Government's policies.
Conservative Members understand the problem. We are committed to tackle it. That is why we will vote for our motion.
We have had a timely and interesting debate. Among other things, we heard about rabbit holes, the Warren commission, grassy knolls and even nits in the Members' changing room, although I have not yet seen those. We also had contributions from my hon. Friends the Members for Ochil and South Perthshire (Gordon Banks) and for Wakefield (Mary Creagh), and the hon. Members for North-West Norfolk (Mr. Bellingham), for Braintree (Mr. Newmark), for Chipping Barnet (Mrs. Villiers) and for South-West Hertfordshire (Mr. Gauke). I agree with the hon. Member for South-West Hertfordshire more than most, if only because he quoted the Prime Minister. One tip I was given this evening for my first winding-up speech was always to agree with the Prime Minister when he is quoted.
My hon. Friend the Member for Wakefield said that we need to get the balance of regulation right in terms of laudable aim and risk. She talked with great experience from her life before being elected to this place. My hon. Friend the Member for Ochil and South Perthshire brought his business experience to the debate when he stressed the need for us to support small businesses. He asked about providing one source of information in a one-stop shop for small businesses. I am delighted to remind him that the Department of Trade and Industry website has a specific one-pager on compliance for small businesses. I shall give him that address. It is one aspect of what we are undertaking.
Sole traders need one form to set up. Private companies need five. That may be too much, but 20 licences, certificates and registrations were needed to start a business in the 1990s. We have also introduced 400 deregulatory measures, cut small companies' corporation tax and extended research and development tax credit, providing £400 million to businesses.
We also heard an interesting speech from the hon. Member for Braintree, who clearly has strong and detailed opinions on regulatory impact assessments. He will have the opportunity to raise those specific points when we discuss various Bills in the Chamber and in Committee.
The hon. Member for North-West Norfolk, in his usual passionate and unique way, offered generous praise to the former Chairman of the Trade and Industry Committee. I also heard him offer sedentary support to Mr. Redwood in his possible leadership challenge. Perhaps new hon. Members do not know that the hon. Gentleman served for six years as a Parliamentary Private Secretary to Sir Malcolm Rifkind, who has his hat in and out of the ring. I look forward to that conversation on his backing for the right hon. Member for Wokingham.
The hon. Member for Chipping Barnet has large footsteps to follow in the shape of Sir Sydney Chapman, who had a strong reputation and was respected by hon. Members on both sides of the Chamber. She and others talked about the need for risk-based assessment as we regulate. They were correct in doing so. We are also committed to reducing the number of regulators who interact with business from 31 to seven, to reducing the number of inspectorates that interact with public services from 11 to four, and to introducing not one but two deregulation Bills. We are determined to make progress in reducing the number of inspections of good councils and schools, strong police forces and other bodies.
We have had an interesting debate. Better regulation is crucial if the UK economy is to meet the challenges of established economies in the US, Japan and elsewhere. It is also crucial if we are to continue to be one of the most successful economies in Europe—if not the most successful—if we are to remain the most stable economy in the G8 and if we are to position our economy strategically so that we can meet the challenges of the coming economic age and the massive global challenge posed by India and China. We will never compete with India and China if we accept the Opposition's rhetoric about low-cost employment. Our competitive edge will depend on our having the best skilled work force, and on basic innovation and world-class research. Better regulation will play an important part in achieving that.
Turning to other contributions, Norman Lamb highlighted the Liberal Democrats' priorities, as we heard about support for a national scheme of dog licensing from a party that opposed the national minimum wage.
Of course it was, and it seemed to be longer than was in fact the case. There was a point at which I hoped that the hon. Gentleman would offer to send me a copy of his speech, and save me listening to the last 10 minutes. He asked about regulatory impact assessments, and I can confirm that, after consultation, a series of amendments have been made to proposed pieces of legislation in the UK and in the European Union, some of which have been withdrawn as a consequence of negative RIAs. He asked whether the use of sunset clauses would become standard. We do not believe that that is necessary. It is necessary in some cases such as legislation on civil contingencies and anti-terrorism laws, but we do not wish to use them as standard, because it would create great uncertainty among business and others about the direction of government. It would also be much more expensive.
Mr. Willetts is rightly considered by himself and others as having two brains, but that assessment is called into question by his publicly stated desire to lead his party. Tonight, he should have used his two brains to help write two speeches for the Tory spokesmen. Without wishing to be unkind, the speech by the right hon. Member for Wokingham was a cut-and-paste assembly of stories from page 17 of various editions of the Daily Mail. [Interruption.] I know I am being generous. In a 30-minute speech, he only woke up in the final 30 seconds. Listening to him, I was reminded of a man for whom time stands still. It is as if in the mid-1990s he fell asleep at his desk as Secretary of State for Wales, and only woke up today. He attacked inefficiency in the UK economy and talked about the scourge of mass unemployment, but as he stirred from his slumbers, he did not seem to realise that we have moved on from the days in which 3 million people were unemployed and interest rates were set at 15 per cent. for one year and at more than 10 per cent. for four years. He missed the fact that regulation doubled under the Conservatives and that the number of statutory instruments increased to more than 3,000. It is no surprise that he is one of the few former Tory Cabinet Ministers who has failed to dip at least one toe into the pond of the Tory leadership challenge.
Labour Members believe that the UK's competitiveness—its sense of purpose and its ability to compete in the EU and elsewhere—is essential if we are to remain at the cutting edge of the EU and meet the challenges of the world economy. We need strong, positive and determined leadership in the EU; we need to continue record levels of investment in, and reform of, the public services; and we need to maintain a stable and dynamic economy. I urge my hon. Friends to oppose the motion and support the amendment that stands in my name and those of my hon. Friends.
Question accordingly agreed to.
Mr. Speaker forthwith declared the main Question, as amended, to be agreed to.
That this House welcomes the steps the Government is taking to remove unnecessary regulations and rationalise inspection arrangements in both the public and private sectors; acknowledges the additional freedoms given to high performing schools, hospitals and local councils; notes the lead the Government has taken in driving forward the better regulation agenda in Europe; recognises the benefits that well-targeted and proportionate regulation can bring in driving up standards; and further notes that the UK is seen by international observers as a leader in the field of regulatory reform and that the success of the UK economy reflects the approach the Government has taken.