Regulatory Authorities (Level of Charges) Bill

– in the House of Commons at 9:30 am on 13th May 2011.

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Votes in this debate

Second Reading

Photo of Christopher Chope Christopher Chope Conservative, Christchurch 9:34 am, 13th May 2011

I beg to move, That the Bill be now read a Second time.

This is a short Bill but an important one because it raises an issue that affects everyone in the country: the level of regulatory charges imposed on them. I think it was the Minister for the Cabinet Office and Paymaster General who coined the phrase “stealth taxes”. He did so more than 10 years ago, but it is still a highly relevant term, because when public sector organisations increase their fees and charges, they are essentially imposing additional taxes on the populace.

While I was looking into possible subjects on which to introduce Bills during this Session, I had some very unsatisfactory correspondence with the Care Quality Commission about the price it was charging for the registration of a children’s hospice in Dorset called Julia’s House. At that stage, Julia’s House had three residents rooms but it wanted to add a further room, and the CQC said it would have to pay a substantial additional fee of thousands of pounds. The hospice chairman wrote to me saying he thought that was unsatisfactory as the hospice is, after all, a charity and all its costs are covered by charitable donations, which in this instance were, effectively, going into the proxy coffers of the Government by way of a regulatory burden.

Following that, the CQC conducted a consultation on its level of charges in general. I will refer later to some of the conclusions to be drawn from that, but it is clear that the CQC is intent on increasing the burden of charges well above the rate of inflation from year to year, partly to meet the Treasury requirement that it should cover its costs by raising charges. We know, however, that it is possible for organisations to reduce their costs, although that option is very often not taken by regulatory authorities. Fortunately, the BBC is now being forced to reduce its costs because the Government have said the licence fee cannot be increased.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

I wonder whether my hon. Friend might dwell a little further on this point and give us a little more detail because, contrary to what he has said, there are cases in which the introduction of a moderate and measured regulation may allow for other regulations to be lifted. That balance lies at the heart of the Bill and our consideration of it.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I note what my hon. Friend says, and he will, no doubt, be able to give us some examples of where he thinks the overall burden of regulation has been reduced as a result of introducing new regulations. I look forward to hearing some of those examples.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Perhaps my hon. Friend will give an example now.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

Yes I will, as I want to inform my hon. Friend’s contribution as well as I possibly can. There is a strong argument that the introduction of professional standards, and therefore some measure of quality, into certain parts of the economy may allow for the reduction of other regulations that are currently in place precisely because those professional standards are absent.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

That is a rather general example, if I may say so. Perhaps when my hon. Friend comes to respond to the debate he will address a specific profession, such as dentistry. Dentists are already regulated by their professional body. They are also regulated under health and safety legislation and so forth, but the CQC is now insisting that it too should regulate them. It is going to cost dentists a minimum of £800 a year, I think, to register with the CQC. I hope that the Minister will in due course explain what added value will come from that, as there is an enormous amount of scepticism about whether it will lead to any improvement in the quality of dentistry in this country. When one looks at the CQC report, one finds that the income from the regulatory fees for dentists will far exceed the amount that will be spent on regulating dentists. That is a good example of what I am describing as a “stealth tax” or an “additional regulatory burden”.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

May I gently chide my hon. Friend? It is open to someone who has a Bill before this House to provide explanatory notes to assist the House in considering the Bill. I understand from the Vote Office that he has not done so and perhaps he could tell the House why. It would have been helpful had he gone to the extra effort of providing those notes. Because he has not done so and because he has gone on about the Care Quality Commission, may I ask whether he intends the definition of “regulatory authority” in his Bill to encompass local authorities?

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

The short answer is that I do not intend that definition to cover local authorities. On the lack of explanatory notes, my right hon. Friend is a lawyer of considerable repute and he is capable of reading a two-clause Bill just as well as anybody else. This is not a complicated 100-page, six or 10 schedule Bill. We know that you, Mr Speaker, are saying that we must ensure we get good value for money, and we want to reduce our costs, so I thought it would be an unnecessary burden and an additional cost to have explanatory notes for something that is self-explanatory. I hope, in due course, to take my right hon. Friend through the terms of this short Bill, so that if he has any doubts, he can ask questions in interventions and so on. Perhaps I shall do so now, as I am being prompted.

Clause 1 refers to:

“No regulatory authority carrying out functions in England”,

so the Bill extends only to England. Although we have to say that it applies to England and Wales, it will apply only to England.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

Clause 1(1) begins:

“No regulatory authority carrying out functions in England on behalf of a Minister of the Crown”.

My hon. Friend says that that is what the Bill is to cover and that he does not intend it to cover local authorities, yet I understand that the analysis of whether a property which is not connected to the water mains is receiving water of an adequate quality is carried out by the local authority, which is undertaking that duty on behalf of a Minister of the Crown, so surely his definition might include local authorities in some circumstances.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

My right hon. Friend may well be right. It may well be that there are certain circumstances in which local authorities are undertaking a responsibility given to them by the Crown and so this Bill would apply to them, but it is not intended to cut across the discretion of local authorities to set their own fees and charges for the services they provide. That would be contrary to the principles of localism, which are supported so widely across the House now.

Clause 1 states:

“No regulatory authority carrying out functions in England on behalf of a Minister of the Crown may increase, over any given period of time, the fees charged in respect of any of its services by more than the rate of inflation, measured by the Consumer Prices Index, over that given period of time.”

Recently, these charges have been increasing very much above the rate of inflation, and I shall give the House some examples.

Anyone who wishes to travel abroad must have a passport, so one can hardly describe this as an optional extra for most citizens. In 1997, a 10-year renewal for an adult passport cost £17.50 but in 2009 the cost had increased to £77.50, which is almost a fourfold increase in real terms in 12 years. Why? Is such an increase not rather unfair, given that everybody needs a passport and especially given that children now have to have their own passports and cannot travel on their parents’ passports? How can such an increase be justified? Clause 1 would make it impossible for the Passport and Records Agency to increase its fees above the rate of inflation over a given period of time without getting specific authority so to do.

Photo of Stephen McPartland Stephen McPartland Conservative, Stevenage

I had the great pleasure of working for the passport office to fund my way through university. While I was there, just pre-1997, it was outsourced to Siemens Business Services, and this was one of the reasons why the costs became so large so quickly. A failed IT project from a previous Government was involved.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

My hon. Friend makes a very important point. Why should the users of passports be paying for this manifest failure of Siemens Business Services? That really does make the cost a stealth tax. Who knows, when applying for a passport renewal, that a significant part of the cost is actually to pay Siemens Business Services for an inadequate IT system? Having said all that, in 1997 the cost was £17.50, by 2002 it had increased to £33—by then the Siemens issue should probably have been sorted out—and it then increased to £77.50 in 2009, so I am not sure that my hon. Friend has the complete answer. However, what he says is interesting because it shows how these bodies are tempted to pass costs on to the users of their services, no matter how unreasonably those costs may have been incurred.

Another example involves the Driver and Vehicle Licensing Agency and the Driving Standards Agency. In 2006, the application fee for the UK driving test was £21, but by 2011 it had risen to £31. The fee for a UK driving test practical on a week day increased from £48.50 in 2008 to £62 in 2011. My right hon. Friend Mr Knight has a great interest in this subject, but I wonder whether he knows the answer to the following quiz question: who was the first person to pass his driving test? If he does not know, I can tell him and the House. The first person to do so was Mr J Beene in 1935, and he had to pay 7/6d in old money, which is the equivalent of 37.5p now. These examples just show how these regulatory costs have risen over the years and how they continue to rise.

Other examples include the significant costs imposed for immigration settlement fees. A lot of cross-subsidy takes place within those and so in the current year the cost faced by a parent or grandparent of someone who has already settled in this country is £1,814, which is a significant fee for that application. You may recall, Mr Speaker, that there was a lively exchange of views a couple of years ago when the issue of fishing licences from the Environment Agency came before the House. Those licences produce a yield of £23 million for the Environment Agency, and my hon. Friend Bill Wiggin raised his concern, and that of others, that the EA had arbitrarily increased by 37% the cost of concessionary rod licences for pensioners and disabled anglers. Why was that done? It was done to help the Environment Agency make a larger profit at the expense of the users of those licences. That is another example of a case that would be covered by the Bill, because if the Environment Agency wanted to increase its charges above the rate of inflation, it would have to get specific authority so to do.

At the moment, there is a proposal from the Police Federation that the cost of a shotgun licence should be increased by some 400%. Again, what could be the justification for that? Surely it is an abuse of the system.

Photo of David Nuttall David Nuttall Conservative, Bury North

Does my hon. Friend agree that such extortionate increases are in fact likely to lead many people to give up licensing their shotguns altogether, which will mean that the police will have to deal with many people holding unlicensed shotguns?

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I think that that would be a danger were the increase in fees to go ahead. A similar danger arises in the case of 17-year-olds seeking their first provisional driving licence. Is it reasonable that they should have to pay a very large fee for that? That fee might be a deterrent to their getting a licence and they might choose—unlawfully, obviously—to drive without a licence. That was a challenge I faced when I was the Minister for Roads and Traffic because in order to keep down the cost of entry into driving for someone obtaining a provisional licence and in order to make ends meet, it was necessary to introduce a modest charge for people who wanted to renew their licence at the age of 70.

There was a big debate in the Government at the time, egged on by a false leader in The Sunday Telegraph, and the proposal to charge a modest fee for 70-year-olds when they renewed their licences was regarded as a tax on pensioners. Nobody really understood the point that my hon. Friend Mr Nuttall is making, which is that to increase the costs for the person seeking to get his first provisional licence would be a potential deterrent for that person. I have raised a similar issue in the context of the very high rates of insurance costs and the Government’s policy of having increases in insurance premium tax that bear directly and disproportionately on the costs for young drivers who want insurance. My hon. Friend therefore makes some very good points.

A constant problem is: if we have regulators, who will regulate them? That is essentially what the Bill is about. It challenges the Government in a time when money is tight and when we are told that family incomes will fall over the next two or three years. The Government are imposing quite tight targets on many Government Departments, but would it be fair if those Departments responded by increasing the fees and charges they impose on the tax-paying public by more than the rate of inflation? I do not think it would.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

I am interested in that assertion. Of course my hon. Friend will know that the Government are sympathetic to the thrust of what he is saying. We understand that regulation is a significant issue for businesses of all types, but I wonder whether the debate about regulation is too often seen in quantitative rather than qualitative terms. My hon. Friend has made a case about the volume of legislation in respect of regulation and I wonder whether he could expand on the quality issue. When regulation is justified, how should it be devised and implemented?

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

My Bill deals with the cost of regulation rather than the wider issues of regulation that have been raised in, for example, Lord Young’s report. I have a number of other Bills before the House that cover various aspects of Lord Young’s recommendations.

My concern is that it is too easy for the regulatory authorities to say that they have to increase their charges because they have to carry out more activities. That is what they do. My hon. Friend will know this better than anybody, because he probably has the coalition’s programme for government on his bedside table, but that document talks about reducing the burden of regulation:

“We will cut red tape by introducing a ‘one-in, one-out’ rule whereby no new regulation is brought in without other regulation being cut by a greater amount” and:

“We will end the culture of ‘tick-box’ regulation, and instead target inspections on high-risk organisations through co-regulation and improving professional standards.”

I am unsure how what the Care Quality Commission has done to dentists fits in with the second paragraph on business in “The Coalition: our programme for government”. Perhaps all will be revealed when my hon. Friend the Minister responds to the debate.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

For the record, because it is important to be accurate about these things, I do not have that document on my bedside table. I have the collected works of Ezra Pound and a selected number of my own speeches.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

We now know where my hon. Friend the Minister gets all these references from, but that is another story.

Let me give an example of a good regulator. Some of us had the privilege of listening to Colette Bowe from Ofcom earlier in the week. She said that Ofcom had been asked by the Government to reduce its costs by some 25%. It has already reduced its costs by more than 20% and it has not increased the costs of regulation but reduced the size of the organisation so that it acts more proportionately. There is a message there for many other regulators whose minds are not concentrated sufficiently because they have the option of always being able to increase their charges. That is why I have these provisions in the Bill.

The Bill does not say that regulators can never increase their charges, but clause 1(2) states:

“No regulatory authority shall introduce a charge in respect of a service currently provided free of charge in England unless a report has been laid before Parliament setting out the reasons for the introduction of the charge and that report has been approved by a resolution of each House of Parliament.”

Other colleagues will have different examples, but at the moment the Department for Transport is actively considering charging owners of vehicles a registration fee just for having a vehicle in their ownership. The statutory off road notification, which is a means whereby an owner can keep a car off the main road without incurring a fee, will be changed and the owner will have to pay the fee that is being introduced, even if they are keeping the car off the main road and not using it on the highway. That would be an additional new charge. Would it be reasonable? I do not think it would, but if it were introduced under the Bill, it would be necessary for a report to be laid before Parliament setting out the reasons and justification for it. If that were to happen, my right hon. Friend the Member for East Yorkshire would no doubt ask questions about the impact on those who have older cars that they do not use very often.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

Does my hon. Friend agree that the introduction of such a charge would be outrageous? In effect, it would be a tax on ownership, which would be unique in this country. Does he share my shock about the reading matter on the Minister’s bedside table?

Would the Minister not be better advised to have a copy of the Jensen Interceptor Mark III workshop manual by his bed?

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I am sure the Minister will respond to that in his wind-up.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Indeed.

One of the problems we face is moths—I can even see them flying around the Chamber—so I have a very heavy volume by my bedside to deal with them, particularly when I go home after a long sitting in the Chamber. They are eating every woollen thing in my house, so it is a real problem. The way to deal with them is to have a big tome on the bedside table.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Definitely not.

I could give many examples of charges, but the significance of the Bill is that it imposes no additional charge on the taxpayer. There is no money resolution because there is no need for one. Clause 1(3) states:

“No Minister of the Crown may increase the level of any grant payable to a regulatory authority as a consequence of the provisions in this Act.”

Without that provision, it would be possible to argue that if we did not allow regulatory authorities to increase their charges, the Government, through the taxpayer, would have to give additional grant aid. That is specifically excluded under clause 1.

Subsection (4) gives a definition of “regulatory authority” that is inclusive rather than exclusive. It includes

“any authority or body which regulates the carrying on of any business or activity, or the practice of any profession.”

There is flexibility for the Government, as subsection (5) gives the Secretary of State power to make

“consequential, saving, transitional or transitory provision” as he or she deems fit. Clause 2 sets out the title and commencement date and states that the Bill applies only to England and Wales.

I hope the Minister will commend the Bill for being short and to the point, and that he will use the opportunity presented by this debate to give some assurances to members of the public that we shall not see increases in the burden of regulatory fees and charges similar to those that took place under the previous Government. Will he assure us that the Government really are committed to ensuring that those stealth taxes are kept under control?

It is in the nature of Ministers not to like the idea that a Bill could not be improved by the Government. There may be problems with my Bill, but even if the Minister cannot accept it in its current form, I hope that the Government will suggest ways it could be improved or modified and that they will not block its Second Reading.

I commend the Bill to the House.

Photo of David Nuttall David Nuttall Conservative, Bury North 10:04 am, 13th May 2011

I am grateful for the opportunity to speak briefly in support of a most laudable Bill. I congratulate my hon. Friend Mr Chope on bringing the measure before the House this morning. The Regulatory Authorities (Level of Charges) Bill might be referred to more colloquially as the control of stealth taxes Bill, and when it reaches the statute book, as I hope it will, perhaps that is what it will be called.

Most people would see the Bill as right for the times in which we live—often described as an age of austerity. I am grateful to my hon. Friend for raising some of the problems that regulatory authorities cause. Whenever I have conversations with a professional, be it an accountant, a solicitor or an architect, it is not long before we reach the subject of the imposition of fees by regulatory authorities. From my time in practice, I know that a common source of concern was that bodies such as the Law Society or the Solicitors Regulation Authority seemed able to charge what they liked, without any real control over how they arrived at their fees.

For an organisation that is not in the competitive world, it is all too easy to increase the charges they make on those they have under their control, instead of cutting costs. In many cases, people have no choice about where they have to apply for the licence or certificate they need to conduct their business. That is why some measure of control over regulatory bodies is appropriate.

Many people see those bodies as above the law; they seem to operate in a parallel universe, immune from the pressures of the real world where there is a need to control costs and ensure that the prices charged to customers and clients are kept as low as possible. Those pressures do not exist when there is a captive market and people have nowhere else to go.

The problem with regulatory authorities is that in many ways they are a law unto themselves. Their activities rarely attract much attention. People may have to return to professional bodies every year, but in the case of many other bodies it is only every few years. My hon. Friend mentioned passports. Over 10 years, the cost of a passport increased from £17.50 to £77.50, which far exceeded the rate of inflation over that period, but nobody sat down with a calculator to work out whether the fee went up in line with inflation, or massively more than that. Businesses have to cope not only with the regulatory burden imposed by such bodies, but with the financial burden.

I fully accept that the Bill is not the ideal solution. I would prefer the abolition of the regulatory burden in the first place, and although I accept that in many cases regulation is essential, I am pleased that the coalition Government have been making excellent progress in culling the numerous public bodies and quangos. No doubt the Minister will refer to that later. However, despite the Government’s activities in culling quangos, hundreds will still exist, so the Bill is relevant and essential to protect both the public and businesses from excessive fee increases.

We might think that the onset of new technology, and the possibility for individuals and companies to file things online—in some cases, they have no alternative—would have the effect of driving down prices. Of course, we know from the licence fee freeze that has been imposed on the BBC that, when an organisation is told to cut costs rather than increase its licence fee, it can be done. A few years ago, when Companies House was given freedom from the Government, its filing fees actually decreased. I remember how pleased companies were that the filing fee for an annual return, for example, stopped increasing and started decreasing, so it can be done.

Photo of Gordon Henderson Gordon Henderson Conservative, Sittingbourne and Sheppey

My hon. Friend mentions that Companies House almost went into private mode and was able to drive down its costs. Will he consider the fact that some licence fees have increased because they are no longer heavily subsidised by general taxation and because Governments have tried to ensure that licences should be paid for by the people to whom they are issued? That is why prices have gone up.

Photo of David Nuttall David Nuttall Conservative, Bury North

My hon. Friend makes a good point, and I agree with the general thrust of his comments: service users should contribute to the cost of the service that they use. It is right that, for example, solicitors and accountants pay for the costs of their regulatory bodies. People have no difficulty with that, but the problem comes when regulatory bodies, which are answerable to no one other than their own membership, feel that they can impose excessive increases way beyond the inflation rate, rather than considering ways to control their costs. That is particularly important when organisations across the public sector are being asked to live within their means, and that is the Bill’s thrust.

I certainly hope that the Bill receives the overwhelming support of the House this morning. I wish it well in its progress through the House and in another place. I look forward to hearing the Minister’s comments and to seeing the Bill on the statute book in the months to come. I am sure that it will be widely welcomed, not just in the House, but across the country.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Innovation and Skills) 10:13 am, 13th May 2011

I commend Mr Chope not only for his customary skill in securing such an optimal slot for his private Member’s Bill, but for his interest in this very important area. Not enough Members are sufficiently excited by regulation, but when growth is flatlining and businesses continue to struggle with the effects of a challenging economy, it is important that we discuss the role of regulators and particularly their impact on businesses.

As somebody who formerly worked for the telecoms regulator, Ofcom, which the hon. Gentleman was good enough to praise, I am familiar with the effect that regulation has on businesses of all sizes. I understand his deep frustration with the Government’s broken promises on regulation. Regulation protects consumers and employees’ rights; it ensures that our industries play their part in moving towards a green, sustainable future; and it keeps citizens safe. It has no doubt saved many lives. It is therefore important that it is effective and enforceable, but challenges arise when ill-thought-through regulation has unforeseen consequences or is interpreted bureaucratically and inflexibly.

Photo of Stephen McPartland Stephen McPartland Conservative, Stevenage

Police forces have recently suggested that inflexible health and safety regulations have prevented them from doing their job and from going to help people in dangerous situations. Does the hon. Lady agree with them?

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Innovation and Skills)

I thank the hon. Gentleman for that intervention. We can all agree that the work of the police needs to be supported by effective regulation and by ensuring that our police have the rights needed to pursue their necessary duties in the best way possible.

Regulation can certainly represent an unacceptable burden on businesses, particularly small and medium enterprises, which may not have the legal advice to interpret regulation accurately or the resources to implement it fully. Like many hon. Members, I am a passionate advocate of effective measures to free businesses from red tape, but I do not believe that the answer is to impose arbitrary restrictions on authorities that could hinder their enforcement capabilities. I am afraid that I am not entirely convinced by the Bill. It would introduce restrictions on a wide range of different regulators, and it would therefore need considerable examination in detail in Committee.

When in power, Labour sought to reduce regulation, by introducing the Better Regulation Commission and the ongoing better regulation programme, and made a number of legislative changes to reduce the costs of regulation. I am sure that the hon. Gentleman would not be promoting the Bill if the Government had managed to keep their headline-grabbing promises on reducing regulation. As the director general of the Institute of Directors is quoted as saying in yesterday’s Financial Times, the Government’s rhetoric on red tape and planning has yet to be matched by action.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I am disappointed that the hon. Lady is not supporting my Bill. She compares this Government with the previous Government, but what does she say about the fact that, under the previous Government, some fees and charges, particularly those of the then Passport Agency, shot up by four times the rate of inflation?

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Innovation and Skills)

I am expressing considerable doubts about the Bill, but I have not said whether or not we will support it—it is too early to say.

It is regrettable that charges have risen in regulatory authorities, not only for passports but in a number of other areas that hon. Members have mentioned. It is the duty of those to whom the regulators are accountable to ensure that those charges provide value for money for our citizens. I am not convinced that an arbitrary imposition of centralised regulation can effect the right kind of change in regulators’ behaviour.

Answers to parliamentary questions asked by my hon. Friend Gordon Banks revealed that, by February this year, this Government had introduced 424 new regulations while removing just 172. That is hardly one-in, one-out. It was reported at the time that the Secretary of State for Business, Innovation and Skills read the riot act to Cabinet colleagues about their lack of progress, while neglecting to mention that his own Department, which is responsible for regulation, had in 10 months of government removed precisely no significant regulations, while introducing 53 new ones. So I understand why the hon. Member for Christchurch expresses frustration.

The Opposition believe that it is essential to take a fresh look at existing regulation, how it is implemented and particularly how it is translated from European directives. However, I am concerned that this arbitrary blanket ban is, like too much of the Government’s current legislative programme, lacking in detail in many key areas. For example, some regulators’ charges are a percentage of their stakeholders’ turnover. Will the Bill limit the absolute amount or the percentage?

Regulators may at times be able to reduce charges. Would not the Bill create a perverse disincentive to reducing charges, given that regulators would know they have to come to Parliament to increase them? For example, in 2006 Ofcom raised the application fees for radio licences while reducing the ongoing fees in order to meet the important criterion of reflecting cost. Under the Bill it would not have been able to do that.

At the heart of the Bill there appears to be a principle of centralisation. Regulators operate in a wide range of industries and areas. Is it appropriate that one regulation should apply to all? In response to the question, “Who regulates the regulators?” the hon. Member for Christchurch answered, “This Bill,” but in most cases, regulators are answerable to Select Committees and Departments of Government, which are answerable to the people. Does not the Bill imply that these Select Committees and Departments are failing in their duty? Do not the many criticisms expressed by hon. Members who have spoken imply that the issue should be addressed directly, rather than obscured by a blanket ban?

We understand the hon. Gentleman’s deep frustration with the Government’s false promises on regulatory reform and we strongly support reductions in and improvements to regulation, but we fear that the Bill could have significant negative consequences for regulators and for industry. We need smart regulation, not blanket bans.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills 10:21 am, 13th May 2011

It is a pleasure to speak about the Bill promoted by my hon. Friend Mr Chope, who spoke with his usual clarity and consistency about the burden on business. He takes the view, which the Government broadly share, that it is crucial that business is free from all regulation but that which is necessary for it to go about its purpose. In a free economy, businesses must be allowed to do what is in their commercial interest and the wider public interest without unnecessary interference from Government. That is a fundamental aspect of what my hon. Friend advocated. It is at the heart of the Bill, and he will be pleased and perhaps even relieved to know that it is also at the heart of the Government’s thinking.

The Bill highlights some important ways in which regulation is enforced in this country. I made the point when I intervened on my hon. Friend that our attitude and approach to regulation need to be qualified by considerations of both quantity and quality. It is true that the Bill deals with cost, but cost has a direct relationship with both of those. It is certainly true that we should measure the volume of regulation quantitatively, and I shall speak at length—but not at undue length—about some of the ways in which that is already done by Government and others. However, it is also true that we should assess regulation qualitatively, because the quality of regulation has a direct bearing on its cost to Government and to the organisations that it affects. The Bill is both a quantitative and a qualitative assessment of regulation measured by cost.

For reasons that will become clearer later in my speech, I cannot support the specific approach that the Bill takes to regulatory change, notwithstanding the warm welcome that I have given to my hon. Friend’s commitment and the opportunity that the Bill gives to consider these matters in greater detail. I shall speak about the matters that it raises in considerable detail as we engage in this interesting debate.

The Bill provides an important reminder of the many ways in which regulation can impact on business and the best means of ensuring that adverse consequences are minimised. It would be helpful to consider some of the principal aims of the Bill. In a rather abbreviated contribution by his usual standards, my hon. Friend took us through the Bill, but I shall do so in more detail. First, the Bill seeks to limit the ability of regulators to recover the costs of the regulatory services they provide. Specifically, the Bill seeks to limit increases in charges to no more than the rate of inflation as measured against the consumer prices index.

My hon. Friend may feel that this is a rather technical point, but these are, after all, technical matters: many examples given in his speech would probably not be covered by the Bill as drafted. He said with typical humility when he was coming to the end of his peroration that he understood that, if the Government supported the broad thrust of the measure, it might be necessary to perfect its drafting, so I acknowledge that he anticipated that some of these technical problems might arise, as they often do when Bills are introduced through the method of a private Member elevating a matter for the consideration of the House and asking for the Government to respond.

I make that technical point because in existing regulatory law the definition is largely restricted to business regulation. Therefore, some of the matters with which my hon. Friend dealt—passports, for example, drivers licences and vehicle licensing—would not necessarily be covered, because those are matters affecting the private citizen. They are subject to the usual rules on public expenditure, managing public money and the normal oversight of spending. That is probably the most appropriate set of frameworks by which they should be assessed. On a purely technical note, therefore, it would be inappropriate to relate the detail of the Bill to the advocacy of my hon. Friend in the areas that I highlighted.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

My hon. Friend suggests that the Bill applies only to regulatory authorities that regulate the carrying on of any business. As he knows, it also covers regulatory authorities regulating the carrying on of any activity. Why does he think the Identity and Passport Service, which is responsible for the carrying on of activities, is not covered by the Bill?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

Activities of the kind that I mentioned and about which my hon. Friend spoke in his contribution are covered by other legislation and a different set of regulatory protocols, which the Bill would contradict. It would require considerable work to achieve a happy marriage between the two. It is impossible to pass the Bill in its current form without its having an impact on other legislation which itself sets up a series of regulatory mechanisms to deal with some of the matters that he described. I do not want him to assume that this is a criticism of the essence of his argument or of the principles upon which it is based; it is purely an observation that technically it would not necessarily be possible for the Government to adopt the Bill in its current form.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

My hon. Friend seems to be saying that regulatory legislation is so complex that it is impossible to simplify it in the way that the Bill would simplify it. If the regulatory legislative framework is so complex, why do not the Government get to grips with making it simpler?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

Later in my contribution I shall describe some of the ways in which the Government have done just that. They have taken a firm grip on these matters. Even in these early days of the long regime to which we can look forward and in which I hope to play a small part, we are making significant progress in the way that my hon. Friend wishes us to do.

It is not a question of the Government not intending to grasp the nettle—to take a grip on the subject, to use his terms—but of doing so in a way that is consistent, coherent and deliverable.

Lest I dwell too much on the first part of the Bill, let me deal with the second part. The Bill would stop a regulator, subject to specific conditions, introducing a charge for a previously free service. A regulator would be able to introduce new charges where previously there had been none on the condition that a report setting out the benefits of the new arrangements was laid before and agreed by the House. Were I a rather more sarcastic person than I am, and if I wished to tease my hon. Friend, which I would not do, as you know, Mr Speaker, I might say to him that he is himself in the Bill establishing a rather elaborate system, to put it mildly, for dealing with the test that he describes: a report to the House, which presumably will be debated, with no real clarity about the length or nature of that debate, and perhaps even referred to a Committee of the House. Who knows how long that process might take? It is absolutely right that these matters should be scrutinised, but the implication of my hon. Friend’s proposals is that we might lengthen, both in terms of time and substance, the mechanisms by which we assess, implement, gauge, and judge necessary regulation.

Photo of John Bercow John Bercow Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Speaker of the House of Commons, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission

Order. Before the right hon. Member intervenes, may I say two things to the Minister? First, he is second to none in his respect for the courtesies of the House, and I invite him, therefore, to address the House and not continually to turn his back on the Chair. Secondly, although his preamble to his main thesis is of great interest to the House, I remind the House and those listening that there are two clauses in the Bill, which consists of one page and one line. I feel sure that it will not be long before the Minister wishes to address himself to the clauses of the Bill.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

The Minister suggests clause 1 might lengthen the process, but does not subsection (2) increase democratic accountability, and should not that be paramount?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

It is that part of the Bill that I am addressing, Mr Speaker, in very specific terms, and, yes, it could be argued that it makes the system more accountable, in the sense that it brings the matters before the House, but the spirit that lies behind the Bill and the powerful advocacy of my hon. Friend the Member for Christchurch, not just now but for all time, of the need to place fewer burdens on business, is that rather than extending and elaborating the process by which we implement, consider and, indeed, devise regulation, we should simplify it.

That brings me to the final provision of the Bill, which focuses on the duties of responsible Ministers and sets out plans to prevent them from increasing funding for their regulatory bodies. That would mean not only that the charging framework within which regulations operate was restricted, but that regulators should not have any additional funding from central Government as a result. I can understand why my hon. Friend argues that, and why the Bill seeks to put that argument into practice, but a better measure of the quantity and nature of regulation is required to consider these matters as fully as they might be considered.

Let me find common cause with my hon. Friend. It is absolutely right that the House, and indeed the Government, should consider the impact of regulation. The CBI has argued that regulation is one of the key elements inhibiting growth. Its April 2011 survey described a Nigeria-style regulatory regime—its words, not mine, I hasten to add. It said that only that country had a similar regulatory burden to that of Great Britain. Apparently, according to the CBI, we rank 89th out of 139 countries for having the biggest regulatory burden. Its concern was that that regulatory burden had a powerful influence on growth, and unless we deregulated, as my hon. Friend’s Bill would, we would inhibit growth. This is not the first time that the CBI has argued this case, nor is it the only organisation that does so.

My hon. Friend and others will be familiar with the Institute of Directors’ regulation reckoner, which it produces regularly, and I have here the 2011 issue. The IOD estimates that the total administrative costs of regulation for business for 2011 are growing and have a considerable impact on business both large and small. It argues that directors spend 17 hours a month on regulation administration and that the annual cost of regulation administration is £7,664 for each director. It says that work forces spend 106 hours a month on regulation. To put that in crystal clear terms, the IOD argues that the burden on work forces is equivalent to one member of staff working continuously on regulation from 1 January until 26 August, which is 34 weeks, to complete a business’s annual regulation administration. That is the kind of evidence that stimulates my hon. Friend’s concerns and motivates him in his mission to address these matters and to encourage the Government to do so too. This is why it is important that we debate these matters, and it is absolutely why the Government also take them seriously. The CBI argues that in order to avoid a double-dip recession the Government must deal with regulation. My hon. Friend suggests that his Bill, which is essentially about the nature and cost of regulation, would help us to do that.

The arguments of others suggest that regulation does not emanate only from this place. It is the view of the Bruges group, with which my hon. Friend is familiar, that the cost of regulation to businesses that we in this country enjoy—or perhaps I should say endure—is about £100 billion, with EU regulation accounting for about half of the total. I know that you will be as shocked as I am, Madam Deputy Speaker, to hear that, and as determined as I am that we adopt such regulation only where absolutely necessary, and that we certainly do not gold-plate it. Yet the IOD tells us that that is precisely what the previous Government did. That is the risk we face.

Not only must this House be diligent in ensuring that the additional regulatory burden I have described is not piled on to businesses large and small, but we must be even more mindful of the need to ensure that that which comes from other lands does not make the circumstances even worse. To that end, the Bill includes a definition of a regulatory agency in order to try to deal precisely with the matters I have described. However, I am advised by officials that the task of defining a regulatory agency, as the Bill does, is always a very complex one.

It might be helpful to build on that advice and start by reflecting on the range of agencies and organisations already involved in our system of regulation, because for the proposed agency to have effect it would need to sit comfortably with the existing framework of regulators and be consistent with the forms in which that regulation is constituted. The large number of organisations and individuals that play a part in securing compliance form a complex landscape. Businesses have the primary responsibility for meeting their obligations under the law, but a number of agencies in the public and private sectors, as well as civil society organisations, also play a role.

My hon. Friend the Member for Christchurch will know that national regulators secure adherence to the rules in many areas of modern life, including nuclear safety, pensions and health. He spoke earlier about some of the others, and I criticised him for using examples that would perhaps not be covered by the scope of the Bill, but none the less he made a powerful point about the range of areas of life and the range of activities and business on which regulation has an impact, and I understand his point.

Local authorities also have a role in enforcing the law in areas such as food safety, under-age sales and consumer protection. Were the Bill to proceed, the regulatory agency my hon. Friend seeks to establish would need an appropriate legal interface with those authorities.

Photo of Greg Knight Greg Knight Chair, Procedure Committee

I wish my hon. Friend would use some of this cold water to wash his car, rather than to pour over the Bill. Why does he not see himself as a reforming Minister and grasp the issues so that he can take this matter forward, rather than using them as an excuse for doing nothing?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

I am disappointed in my right hon. Friend, as a fellow owner of a Jensen Interceptor Mark III and member of the owners club, because what I have said is merely my preliminary remarks on why the Government cannot accept the Bill in its current form. I will move on to why we feel that aspects of the argument put forward by my hon. Friend the Member for Christchurch are worthy and compatible with the Government’s determination to reform these matters in a way that reduces the burden of regulation. My right hon. Friend Mr. Knight should not be so hasty in assuming that I do not share the reforming zeal that motivates him and others to make life more straightforward for our businesses so that they can add to the prosperity we all seek.

On the specifics of the Bill, my hon. Friend the Member for Christchurch advocates a regulatory agency. However, unless that agency were to interface with the existing mechanisms for dealing with regulation, it would be impossible for the Government to accept its establishment as framed in the Bill, because there are many agencies that play an important role in the regulatory system, in both national and local government, and also agencies that play a role beyond the framework of the law. Trade associations, in particular, provide a service to businesses in the form of regulatory advice and guidance. Lord Young’s review of health and safety law, which has been referred to, highlighted the extent to which other agencies, such as the media and private consultancies, can create their own regulatory burdens. We are therefore dealing with diverse responsibilities.

In some areas regulation is effectively free to business, which is why, as the Bill deals with costs, it is important that we assess which types of regulation impose costs and which do not. The costs of the regulator and regulation are often met by the Government. My hon. Friend, in his speech and in the Bill, makes no detailed assessment of the balance between the costs absorbed by Government and the costs imposed on businesses. The Government’s view is that in many cases it is in the interests of fairness that the costs of regulation are met by those who are regulated. Where such fees are charged, they can take a variety of forms, from licences to levies and charges for specific services.

In those terms, the Bill, as I have said, starts from the commendable idea that businesses should be given as much certainty and transparency as possible on how they are charged by regulators and that appropriate controls should be in place to govern the way in which they are imposed. In that respect, I find common cause with both my hon. Friend the Member for Christchurch and my right hon. Friend the Member for East Yorkshire, who call for a zealous approach to assessing those costs and measuring how Government activity might add to them. It is right that the system, with regard to the imposition of costs, how they are gauged and how they grow, is properly assessed.

Before I address the Bill’s specific points, I think that the House would expect me to put in context the scale and ambition of the Government’s approach to regulatory reform. Just yesterday I was looking at those matters with the Prime Minister and the Deputy Prime Minister in relation to apprenticeships. As you know, Madam Deputy Speaker, it is the Government’s intention to build more apprenticeships than Britain has ever had before, and we were looking at how some of the costs of putting in place the necessary regulation on apprenticeships could be lightened. For example, for large companies that are providing apprenticeships, we have announced that those costs—

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I am very grateful to the Minister for supplying the House with so much information, but I am struggling to ensure that he remains in order. I understand his point about burdens, but the Bill relates to fees already charged for services, not to increasing those fees. I would be grateful if he returned to that specific point.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

It might be helpful to you, Madam Deputy Speaker, and to the whole House if I explained how what I am about to describe is directly relevant to the advice you have offered.

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. It might be helpful, but I have said very specifically to the Minister that this one-clause Bill, as Mr Speaker previously pointed out, is about fees charged, rather than burdens. The Minister must stay in order. If he does not, I will intervene on him again, so perhaps he will reflect on what might be helpful in those circumstances.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

Of course, Madam Deputy Speaker. I am guided, as ever, by your advice in these matters.

The Bill suggests that the fees charged for services that are determined by law and part of the regulatory agenda should be gauged in a way that allows this House to make a judgment about their impact. The Bill, in those terms, needs to be assessed against its likely impact and effectiveness, but we are right to argue that it also should be gauged against the existing provisions, both in law and beyond, that affect costs and fees in respect of regulation, and the Government’s absolute determination to reduce that burden.

So, my hon. Friend will want to know that the moratorium on new domestic regulations for smaller companies, which the Government have put in place, certainly affect the provisions of this Bill. The determination of the Government to publish all regulations sector by sector will to some extent do what the Bill intends, because it will give us a clearer indication of the character and nature of costs, and how they rise.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Surely the effect of the Bill will be to ensure that regulators are not able to increase their fees and charges beyond the rate of inflation, and they will therefore have to reduce their costs and probably their regulatory activity, which in itself will be beneficial to business, will it not?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

We are back—are we not?—to the point that was made earlier in this brief debate, about quantity and quality, because it is true that the Bill will necessitate the reconsideration of quality and effectiveness because of the link to charge. In other words, regulation will have to be legitimised around price, but it would be dangerous to assume that the effect of introducing that new provision—unless seen in the context of what is already there; the point made is existing charges and costs—might be as profound as my hon. Friend describes.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

My hon. Friend will realise that HM Treasury’s guidance on fees and charges requires all regulators to cover their costs where they have fee-setting functions. Therefore, the Bill, by forcing regulators to reduce their costs, which they can pass on in the form of fees, will reduce their activities and, thereby, the burden of regulation.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

That—ipso facto—is certainly the case, but the qualitative judgment about regulation that I have advocated would need to be applied, too. My hon. Friend says that the Bill needs to be set in the context of what the Government have already agreed. The Government have agreed, as he knows, that they will regulate only

“having demonstrated that satisfactory outcomes by alternative self-regulatory or non-regulatory approaches; and where analysis of the costs and benefits demonstrates that the regulatory approach is superior by a clear margin to alternative self-regulatory or non-regulatory approaches; and where the regulation and the enforcement framework can be implemented in a fashion which is demonstrably proportionate; accountable; consistent; transparent and targeted.”

If one applied those principles to my hon. Friend’s argument, one would find, I assert, that his Bill is not necessary. Furthermore, I assert that his Bill, rather than applying those broad principles—I say “broad”, but they are clear in intent—would put in place a series of mechanisms that, as I argued earlier, might lengthen and make more complex the process.

The Bill sets up a mechanism by which Parliament must scrutinise those matters, and my strong assertion and, indeed, recommendation to my hon. Friend is that the adoption of the regime I have just described, already articulated by the Government, is a more effective means of achieving his ambition than the Bill, which might have perverse consequences, albeit unintended, in making the system rather more costly and difficult than it need be.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

May I invite my hon. Friend to move away from the rhetoric to the reality, in the context in particular of the Care Quality Commission’s decision to start regulating dentists, who are already adequately regulated, and then to impose on them charges of £800 a year each to fund the regulation? The provisions of the Bill will catch that activity.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

I am going to come on to dentists and the rationale for dentistry regulation, because there has been some debate about it already this morning in consideration of this Bill, but before I do so perhaps I may be very specific, as you have invited me to be, Madam Deputy Speaker, about fees, charges and levies, which lie at the heart of the Bill.

The fundamental policy of government is to charge for public-provided goods and services, where that approach helps to allocate the use of goods and services in a rational way, because it prevents waste through excessive or badly targeted consumption. The Government argue that that makes for easier comparisons with the private sector, promotes competition and helps to develop markets. When a fee is charged for access to public goods or services, there are specific rules on how the charge should be determined, and it is important to protect Parliament’s rights to decide which services should be charged for and how public resources are allocated.

That is much like what my hon. Friend wants to achieve, but my argument is that there are mechanisms already in place to do what we wants. I accept that it is necessary for those mechanisms—how can I put it?—to be enlivened and accelerated by a commitment by Government to be absolutely scrupulous about where regulation applies, what is charged for and how those charges, those fees, should be gauged. I am giving my hon. Friend an assurance—not gold-plated but copper-bottomed, one might say—that the Government will indeed be determined, as he asks us to be, that the extent and character of that regulation, and the fees and charges associated with it, should be legitimised, should be moderate and should not increase in an unjustifiable way.

A word about the specifics. My hon. Friend asks me to be less rhetorical. Most people enjoy—I will not put it more extravagantly than that—the rhetoric with which I embellish what I do, but I am prepared to take the slings and arrows as well as the praise, so I will for a moment or so move from rhetoric to detail.

The rationale for dentistry regulations, which my hon. Friend draws attention to as an illustration of the purpose of this Bill, is clear. The Care Quality Commission is the responsible regulator, and the registration of dentists is a new requirement, as he says, reflecting the commission’s new regulatory responsibilities. The purpose of registration is to bring a single, consistent approach to monitoring dental practice, including private dental care practice, for the first time. This is regarded as an essential basis for encouraging swift action to protect the public, and it will give the public an accessible single source of information on quality. Fees are variable, according to practice, size and type.

That is a perfect example, if I may say so, of two points that I have made: first, the regulation that is put in place should be coherent, clear and as simple as possible; and secondly, the fees and charging regime associated with that regulation should be established against a set of criteria that can be justified and supported by the profession concerned.

I do not want to delay the House unduly, so I shall move swiftly on to the matter of the principles that underpin charging regimes. As we know, Madam Deputy Speaker—your advice has guided me accordingly—this Bill is principally about charges and pricing. The principles that apply to pricing and charging by regulators are those that apply to publicly provided goods and services in general, and they have at their core the central doctrine of setting charges to allow full cost recovery. We need to remember that in many cases regulators give consumers and others confidence that regulated sectors are meeting their legal responsibility. Regulators can also create the conditions that provide businesses with a level competitive playing field by taking effective action against criminals operating in their respective markets. We need to remember that in many cases it is appropriate for those whose activities need to be regulated to bear the cost of regulation, not the taxpayer.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Perhaps my hon. Friend would apply the principle that he has enunciated to the regulator on access to higher education. Most people would think that that is a totally unnecessary additional burden. Is he saying that the cost will have to be borne by the universities?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

My hon. Friend is displaying the mischievous quality for which he is known and which the House enjoys, but I will not be tempted, Madam Deputy Speaker, for fear of your benevolent but strict rule, to get into a debate about higher education access or anything related to it, except where it is absolutely pertinent to the Bill before us. I rather suspect that you might come to the same conclusion that I have, which is that it is not completely pertinent to the Bill, so I will continue on the very strict and controlled theme that I was developing.

We will consult shortly on the extent to which some of the functions currently carried out by the statutory regulators might be performed either by businesses themselves, through better recognition of internal quality controls, or by other agencies through services such as the use of accreditation and certification, which can provide some of the safeguards traditionally put in place by state regulators. This would have a direct impact on costs, fees and charges, because in those circumstances the decisions about those matters would be dealt with within the sectors or businesses themselves.

There will be cases where we can lighten the burden of regulation and the character of some of the costs that my hon. Friend has highlighted by taking a more radical approach to where regulation should apply, who should regulate, how decisions should be made about its extent, and, most saliently, what should be charged for what service. My hon. Friend is absolutely right that that decision is better taken at the sharp end, if I might put it in those terms, rather than distantly in Westminster and Whitehall. However, there will inevitably be cases where the intervention of a state regulator is required, particularly to protect consumers or to provide a level playing field for businesses. I take the view that professional standards in these terms should be looked at more closely by Government. In some cases, as I suggested earlier, the adoption of professional standards may allow us to reduce the overall burden of regulation, and the costs associated with it, in the way that my hon. Friend recommends.

The Treasury’s publication, “Managing Public Money”, sets out the main principles for dealing with resources used by public sector organisations. It makes it clear that:

“Where a fee is charged for access to public goods or services, there are some specific rules about how the charge should be determined. It is important to protect Parliament’s right to decide which services should be charged for, and how public resources are to be allocated.”

This principle is as valid in the case of regulation as with any other public service. Setting a fee or charge for a public service usually requires powers in primary legislation, with the charge structure and each charge set out in secondary legislation. Therefore, a parliamentary approval procedure of the kind that my hon. Friend advocates in his Bill already exists, and, as I said earlier, it is one that is less likely to lead to delay and complexity than the albeit well-meaning provisions in his short Bill. The guidance on calculating fees is also clear, stating that the full cost of each category of service should be measured realistically and objectively.

As I mentioned earlier, local authorities are regulators, and they sometimes provide purely discretionary services. In this regard, they operate within an additional framework of control set by the Local Government Act 2003. I know that my hon. Friend will be familiar with section 93 of that Act, because he researches these matters with diligence and care before he comes to the House to speak about them. He will know that that section, which is headed,

“Power to charge for discretionary services”,

contains the power that I have described. This power is subject to a duty to secure that, taking one financial year with another, the income from charges under the section does not exceed the costs of provision—precisely the point that he made in an intervention a few moments ago.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

But that is not the point, is it? Anybody can ensure that their charges do not exceed the costs of provision; I am trying to ensure that the costs of provision are kept down because the charges cannot be increased by more than the rate of inflation.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

The purpose of the Act that I mentioned is to ensure that organisations—in this case, local authorities—do not make a profit out of the service, so that the cost, as I said, is related to the fee. My hon. Friend is arguing, is he not, that even where the cost of provision—it may be a perfectly justifiable cost, by the way—grows or changes for some reason, the fee associated with that cost could not be raised. If taken to its logical conclusion, this would place local authorities—or, if we apply the principle more widely, Government—in the impossible circumstance of not being able to recover costs of provision from businesses or individuals even where those businesses or individuals were gaining from the application of that provision. That would be a perverse effect of his Bill.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

Let my try another one on my hon. Friend. It relates not to local authorities but to the Forestry Commission, which is a regulator. The Forestry Commission is having its grant cut by central Government, but it still needs to carry on its regulatory functions. In the New Forest, it is thinking of funding quite a lot of those costs by raising car parking charges, which do not currently exist there. Where does any public accountability come into that?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

Again, I am not going to speak about the specifics of that because it is a matter that I would want to look at in more detail before I said anything definitive. The principle remains that we should address the relationship between the scale of provision, the cost and the fees charged. That should, quite properly, be set out by this House in regulation, if not in legislation, and—I take my hon. Friend’s point—it should be proportionate.

Let me repeat, for the benefit of my hon. Friend and the House, that the Government share his determination to scrutinise these matters with new zeal and with diligence. He is right that we need to have a basis on which we consider and legitimise regulation of this kind and the costs and fees associated with it. I agree with him that it is important that agencies, whether in local government or elsewhere, can justify what they charge. I simply do not think that this Bill is the best way to do that. I welcome the fact that its introduction has given us an opportunity to consider these matters. I may say a little more about that in my final remarks.

The primary authority partnership scheme between businesses and regulators constitutes the kind of discretionary service that I was describing prior to my hon. Friend’s intervention. It was established under the Regulatory Enforcement and Sanctions Act 2008 to provide more consistent regulatory enforcement for businesses, charities and other organisations operating in more than one local authority area. It entails an advisory partnership between a specific business and a given local authority. Having assessed the resource requirements of the primary authority partnership scheme, the local authority and the business have to agree how the costs will be met.

The local authority is entitled to charge the business for services applied through the partnership. In deciding whether or to what extent to charge the business, the local authority should consider all relevant matters, including the local authority’s policy in respect of supporting local economic prosperity and the existing resources provided to the business by the regulatory service and other services of the local authority. When advice and guidance have been developed for use with more than one business, an individual business should pay no more than a reasonable proportion of the costs. Where a local authority decides to charge for some or all of the services provided to a business, it can recover only the costs reasonably incurred in providing those services. In calculating the costs, the local authority should, like a national regulator, have regard to the guidance issued by the Treasury in “Managing Public Money”, to which I referred earlier.

A further statutory provision that affects the way in which regulators charge is the Regulators’ Compliance Code. I am surprised that we have not heard more about the code in our considerations, because its existence mitigates some of the arguments of the advocates of the proposed legislation. It is a statutory code of practice to which regulators must have regard in their work. It puts forward the general principle that

“Advice services should generally be provided free of charge, but it may be appropriate for regulators to charge a reasonable fee for services beyond basic advice and guidance necessary to help ensure compliance. Regulators should, however, take account of the needs and circumstances of smaller regulated entities and others in need of help and support.”

I draw the House’s attention, in those terms, to the effect of regulation on small business. Smaller businesses often find it more difficult to deal with these matters, purely because of scale. Excessive regulation can have an extremely damaging effect on small business growth. As a Government, we will certainly look again at the effect of regulation on business as a direct result of the overtures of my hon. Friend the Member for Christchurch.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I am grateful to my hon. Friend for saying that he will look again at these issues. Will he address his remarks to the issue of small charities, such as Julia’s House, which are even more deserving of help? Despite the guidance to which he referred, the Care Quality Commission imposes the same standard charges on a children’s hospice with three or four beds as it imposes on much larger, and even commercial, organisations. How is that consistent with the guidance?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

My hon. Friend is right that small organisations in the voluntary and charitable sector are also affected by the burden of regulation. I will, as a result of his overtures, look at that matter too. I know that the Minister of State, Department for Business, Innovation and Skills, my hon. Friend Mr Prisk, who has responsibility for regulation, takes these matters very seriously. He has been a great champion of small organisations in this respect. However, it is important that the Government are informed by the House. It is clear that Members from both sides of the House understand that if we are to build the big society that we seek, small organisations, charities and community organisations will play a critical part. It is right that we should look specifically at how regulation affects those organisations, and we will do so as a result of the arguments of my hon. Friend the Member for Christchurch and other Members.

I will move on to explain why we feel that legislation is unnecessary in this case. This Bill, although it makes an immensely important point about the effects of regulation in practice, is not one that the Government can support. That is not just because there are existing controls that address the issues that the Bill seeks to address. It is also because regulators have a responsibility to ensure that they provide value for money and that the costs are as low as possible, while the quality of regulation remains appropriate. There needs to be flexibility in practice. Although we agree absolutely that we need to ensure that the burdens on business as a whole, and on the other organisations that we have just spoken about, are taken into account when we introduce or review regulations, the flexibility that I have described needs to reflect a wide range of regulatory circumstances. That would be inhibited, at least to some degree, by my hon. Friend’s Bill.

There are circumstances in which a modest uniform charge is appropriate. Many licensing regimes, where individuals must apply for a licence to trade, have that character. I spoke earlier about my view that the adoption of professional standards through licences to practise can be helpful in reducing regulation. It can provide a simpler series of mechanisms to guarantee quality, protect public health and ensure public safety.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I am sorry to go back to this point, but my hon. Friend keeps referring to the issue of professional standards and duplication. How does what has happened to dentists fit in with that philosophy? They were already regulated by their own professional standards body, and now have to pay a fee to be regulated by the Care Quality Commission.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

We have spoken of dentists already. Perhaps I may take this opportunity to pay tribute to my own dentist, Lisa Jamieson of the Fen House dental practice in Spalding, who looks after my teeth and those of my wife and children. I will discuss this matter with her, because I believe that it is important as legislators that we are in touch with those whom legislation affects. Nevertheless, the case that I made on dentists is that the adoption of the new regulatory regime will simplify how we ensure that dentists are doing what they should. There are circumstances in which a new approach, framed by the desire to reduce regulation, can assist us not only in the matter of regulation, but in its cost.

There are circumstances in which a substantial charge is appropriate. Some regulatory regimes require the inspection of hazardous, highly technical processes, and would otherwise present a substantial cost to the public. There are also circumstances in which a tiered approach is appropriate, for instance to reflect the costs to the regulator of regulating different sizes of business.

The proposal that my hon. Friend articulated with such style and charm would limit regulators’ flexibility to innovate and incentivise in ways that work to the benefit of good, compliant businesses. The existing system, by contrast, supports that flexibility. Regulators might seek to reduce fees for some regulated organisations —we have spoken of small businesses, small charities, community organisations and so on—to reflect the intrinsically lower costs of the services provided to them. Yet they might simultaneously increase charges to organisations when the service in question is palpably more costly. That would surely be the case in respect of larger businesses, in the case of which checking compliance requires significantly more time and resources.

My hon. Friend’s ambition is to allow small organisations, be they businesses, community organisations or charitable organisations, to thrive because of the lighter hand of Government that both he and I wish to see applied. He will note that I take that ambition so seriously that I have said the Government will examine it once again with a critical eye. It is entirely possible to achieve it within the flexible regime that exists in respect of fees and charges, and it might, ironically, be inhibited by the proposals in his Bill.

Meanwhile, the Health and Safety Executive has recently announced a proposal that would impose charges on businesses that were found to be in material breach of health and safety laws. It would not seek to recover costs for purely technical breaches, of course, and compliant businesses would not pay a penny. That is another example of the flexibility that I am advertising as a virtue of the existing regime.

It is fair to say that a range of approaches are appropriate, including ones that create strong incentives for better practice in businesses. In practice, the relevant legislative framework allows for all those approaches, and it is not appropriate to impose a single framework on all regulators. It is for them to determine the relevant approach, within the powers confirmed by Parliament and the public spending rules overseen by the Public Accounts Committee and the Comptroller and Auditor General. The existing arrangements provide meaningful parliamentary oversight, combined with a pragmatic foundation for regulators and Government to adjust their approach according to dynamic circumstances. If we were to adopt an entirely different approach founded on the consumer prices index, as my hon. Friend suggests, rather than on a cost recovery basis, the incentives would be very different.

Finally, increases in fees limited to the CPI are unlikely to reflect changes in a given regulator’s costs. My hon. Friend argues that the cost to regulators is not the issue, and that the charge to organisations, whether they be businesses, individuals or otherwise, is always of paramount importance. However, it is equally important that there is some relationship between provision and fee, between cost and charge. It would be a very blunt instrument to apply the mechanism at the heart of the Bill in the way that he suggests.

If the increase in the full cost of a service exceeds CPI, capping fees would either leave the taxpayer to pick up the bill or leave the regulator to do the job within its official resources. It would not necessarily save taxpayers money, and it could arguably let businesses and individuals off the hook, because they would not have to pay the price necessary to cover the regulator’s costs. That might be my hon. Friend’s intention, but I have never heard him suggest before that the taxpayer’s burden should be increased in such a blunt way. Indeed, I know for a fact that he has long been an advocate of cutting taxes where we can.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I thought for a moment that my hon. Friend was going to traduce me. I made it quite clear at the beginning that the Bill would not add to the burden of taxation or public expenditure, and that is set out clearly in clause 1(3). I am surprised that he is not praising that subsection. Can he give some examples of where he thinks it is reasonable for regulators to increase their costs beyond the rate of inflation?

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

If the cost of provision to a regulator rises for technical reasons, and that regulator has a perfectly sensible set of regulations with the protection of public good or public safety at their heart, it would be entirely appropriate to relate the cost of that provision to its price. That should be legitimised and justified, and it is absolutely right that we put in place criteria that ensure that any such price increase is a true reflection of a change in cost, but to do the opposite and prohibit any change in charge regardless of a change in the cost or character of provision, as my hon. Friend suggests, would be a very blunt instrument. I am arguing for flexibility; he, rather untypically, is arguing for a rigidity in the application of public policy, insensitive to circumstances. With a bitter irony from his perspective, that might increase costs to the taxpayer, contrary to the part of the Bill that makes it clear that that is not his intention.

I do not wish in any way to be excessively critical of my hon. Friend, who is a distinguished Member, but I argue that the Bill has at its heart a contradiction. I know that that is unintended, but none the less, it would have potentially dire consequences for the Government and for him. His reputation as a tax saver, as a guardian of the public interest and as a man who stands in the way of excessive state interference in the affairs of individuals and in the freedom that he cherishes, is at stake. I stand here as his guardian, and as the protector of his interests.

I know that this will disappoint Members, but I wish to begin to move to my conclusion. It would be bad for both the public, whom we are seeking to protect, and conscientious businesses that are doing their best to comply with the law, if we left regulations unenforced because the Government did not have the capacity or power to supplement any shortfall. The Bill would limit the Government’s ability to intervene, which would create just such a circumstance.

Our view is that the existing flexible framework provides the best means of controlling and keeping an appropriate limit on the fees and charges imposed by regulators. However, for the avoidance of doubt and to reassure my hon. Friend, let me be crystal clear that there is a certain determination on the part of this Government to ensure not only that the quantity of regulation is reduced but that its quality is re-examined with a vehemence that has not been typical of recent Governments, and that the costs associated with any such regulation are tested empirically in a way that protects individual, business, consumer and taxpayer interests. The existing regime, which provides for charging at full-cost recovery, enables regulators to recover costs from those who are regulated.

It is right that regulators have a responsibility to ensure that regulation is efficient, effective and provides value for money in the way the Bill intends. My hon. Friend is in tune with C. S. Lewis, is he not? The latter said:

“Aim at Heaven and you will get Earth thrown in. Aim at Earth and you get neither.”

My hon. Friend aims at a heavenly circumstance in which regulation is only ever applied out of absolute necessity and at minimum cost. We are sympathetic with that spirit, but perhaps the more important point to take from this debate is the extent to which any regulation necessarily brings with it some expense. We need to get to grips with that problem at source. I have spoken repeatedly in this speech about the measures the Government have put in place to constrain the flow of regulation. I believe that that is the right way forward. We have listened to his overtures, however. This debate has given us the opportunity to reconsider these matters, and has been an additional spur, a goad or perhaps just an encouragement to be still more determined to reduce the regulation on individuals, businesses, charitable organisations and others that might inhibit growth and, worst of all, inhibit virtue.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch 11:32 am, 13th May 2011

I would like to reply briefly to this debate. I am grateful to the Minister for setting out, in just over an hour, all the reasons why his Department does not think that this Bill is the right solution, although at least he acknowledges that there is a problem. In the absence of any other possible solutions, however, I am not sure that one can say this Bill is not worthwhile. Although the Minister talks a lot about sympathy and says he wants to reduce the quantity and increase the quality of regulation, it is apparent from the figures that he gave, as well as the quotes from the CBI and the Institute of Directors, that things are probably getting worse rather than better. The shadow Minister made that point in relation to the number of regulations being introduced and removed from the statute book. I sympathise with my hon. Friend the Minister: he is not the Minister responsible for deregulation; that is not his main brief and he is here today as the departmental Friday duty Minister. However, I was disappointed that he did not respond to what the hon. Lady had to say.

In essence, this is whether we are going to try to control the stealth taxes reflected in the increased charges that regulators impose on consumers, individuals, businesses and charities. Nothing I have heard from the Minister gives me any encouragement in that regard. He was unable to explain—to my satisfaction anyway—why the Care Quality Commission is now trying to regulate dentists. He was unable, or did not wish, to engage in an argument about how we were going to pay for OFFA, the higher education access regulator, and whether it was justified or whether it was going to be a new financial burden on the universities. He was unable to answer my question about the Forestry Commission now seeking, because of a cut in Government grants, to fund its regulatory activities by imposing new charges that will force people to pay for their car parking in the New forest and elsewhere.

Treasury guidance states that regulators must increase their charges to reflect their costs, but there is no guidance saying that those costs must not increase by more than the rate of inflation. That is the key to it. If the regulators were not allowed to increase their charges beyond the rate of inflation, they would have to keep their costs to within the rate of inflation. They would have to reduce their costs and become more efficient. I cited Ofcom as an example of a regulator that has reduced its costs by 20% in the past year. The BBC, too, is now having to concentrate its mind on reducing its costs significantly because of the pressure put on it.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

I plead guilty to two things—to not being the Minister for regulation, and to what my hon. Friend described earlier as elegant and flowing rhetoric. However, I will not plead guilty to not dealing with dentists. We did dentists to death! My argument was that the new regime would simplify the regulatory system and its associated costs and fees. That is in contrast to the current regime, which is more costly and confusing. Surely that is in the spirit of his Bill.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I forgive my hon. Friend because I do not think he is an expert on dentistry. However, I do not think that he or his officials have addressed the fact that dentists are already properly controlled by the professional dentistry bodies. The CQC is now adding to that regulatory burden, rather than substituting for or simplifying it. However, we can have a separate debate about that on another occasion perhaps. That example alone shows that all the lofty rhetoric about the Government’s intentions —even those in the coalition agreement—to reduce the burden of regulation is not being reflected in practice.

I am grateful to my hon. Friend Mr Nuttall for his support for the Bill, to the shadow Minister for her observations and to the Minister for what he has said. In essence, he has criticised the two parts of clause 1 designed to introduce flexibility. I could have just said that no regulatory authority should introduce a charge in respect of a service currently provided free of charge. Perhaps on reflection that might have been better because it would have been clear. I thought that we needed some flexibility, which is why I used the wording I did, yet now I have been criticised by the Minister for doing so.

The Minister said—this is the most worrying aspect of today’s debate—that the panoply of the legislative framework covering regulation is so complex and impenetrable that it is impossible to simplify and cut across it in the way I am trying to do with the Bill. I hope that his Department, instead of producing these long, wordy briefs, will start getting to grips with rationalising the legislative framework around regulation and regulatory burdens. I hope then that we will be able to deal with the issues in a simpler way.

Photo of John Hayes John Hayes The Minister for Universities and Science, The Minister of State, Department for Business, Innovation and Skills

I will give this guarantee to my hon. Friend for the benefit of the whole House. In the matters for which I have responsibility within the Department for

Business, Innovation and Skills, I will stand tested by the criteria that he in broad terms has established. We will create a system that is freer, less burdensome and less regulatory and that allows those associated with further education, skills and lifelong learning to go about their business properly, in the way they see fit and in response to need, rather than be dictated to by the micro-management that typified the last Government.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I am grateful to my hon. Friend for that commitment. In due course perhaps I will table a parliamentary question so that he can explain what has happened under his leadership over the past year on those matters. It is important that the Government do not just talk about what they are going to do in future; they must show that they are reducing the burden of regulation. I am very depressed that they are not prepared to support the Bill, although I wish to test the will of the House on the matter.

Question put, That the Bill be now read a Second time.

The House divided:

Ayes 6, Noes 38.

Division number 272 Business Support (Lancaster and Fleetwood) — Regulatory Authorities (Level of Charges) Bill

Aye: 6 MPs

No: 39 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.