Second Reading

Part of Small Business, Enterprise and Employment Bill – in the House of Lords at 5:07 pm on 2nd December 2014.

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Photo of Lord Curry of Kirkharle Lord Curry of Kirkharle Crossbench 5:07 pm, 2nd December 2014

My Lords, I, too, congratulate the noble Baroness, Lady Harding, on her excellent maiden speech. Like other Peers present, I have no doubt that over the coming years her contribution to the debates in this House will be enormous, and we very much welcome that.

I am rather sorry that the noble Lord, Lord Bilimoria, has just left his place because I was going to comment on the fact that he had supported the establishment of a lot of curry businesses. I get lots of comment on my surname—I have started a number of Curry businesses. Like him, I employed two people when I formed my first business, although I must confess it has not been anything like as successful as his.

However, I speak not just as someone involved in small business but as the non-executive chair of the Better Regulation Executive. I will repeat what I said during the Deregulation Bill. I was appointed by the previous Government and it is an independent position. I was—very correctly—reprimanded by the Front Bench for using the word “we” when I referred to the Better Regulation Executive because it sounded as if I was part of the Government. I am not. I am an independent chair but we have contributed significantly to elements of the Bill.

I want specifically to refer to Part 2 of this important Bill and, first, to the proposal for small business appeals champions. Clauses 17 to 19 set out a new duty to appoint appeals champions to the national non-economic regulators. It is important to growth and the economy that poor regulatory decisions do not hamper businesses, so businesses must know how to appeal or complain when they feel that they have been unfairly treated by their regulator and believe that that process will be fair, value for money and accessible. Regulators’ appeals and complaints procedures must work for businesses—in particular, small businesses, which we know suffer disproportionately from burdensome regulation.

However, when we looked at this question, we found that most businesses did not feel that the procedures were working. Common issues included: that there was no informal way to resolve issues without a formal appeal; that there was often no alternative to court action; and that it could be extremely difficult to get a second opinion. Of the businesses we spoke to, many simply had not bothered to appeal a decision that they did not agree with, citing as reasons that there was no point, that it was too expensive or that they simply did not have enough time. Some felt that they might be targeted by the regulator if they appealed against the decision.

However, issues varied both between sectors and between regulators, and there were some examples of extremely good practice, so a one-size-fits-all approach will not work. That is why I welcome the duty to appoint small business appeals champions as part of a wider programme of work on better enforcement across national non-economic regulators, which also includes the Regulators’ Code and the growth duty. The latter was recently debated by the House as part of the Deregulation Bill.

Secondly, and in a similar vein, I want to speak on the business impact target, set out in Clauses 21 to 27. Regulation is important. We need it for essential protections and to allow the market to function efficiently. Many people have asked me as chair of the Better Regulation Executive whether I am against regulation. Of course, I am not; regulation is essential. But it needs to be efficient and smart. We need to ensure that regulations deliver the maximum protection for the minimum cost on small businesses. That way, we get the best of both worlds, with protections that do not create an undue drag on the rest of the economy.

The UK can take great pride in having been a leader in regulatory reform. Other nations, grappling with the same issue of balancing protections and burdens, look to the UK’s advanced regulatory management structure. A growing number of other countries are now following our lead in setting some form of regulatory management target. Italy, France, Spain, Portugal, Austria, Canada and South Korea, for example, are now all implementing forms of one in, one out.

When I visited Brussels after taking up my position and suggested that the approach be taken there that we were considering in the United Kingdom, I was scoffed at and told that this would be an impossible task and certainly would never be accepted in Brussels. Increasingly, member states within the European Union are following our lead in adopting this principle.

The savings to business that have been delivered under the current one-in, one-out and one-in, two-out systems are impressive: over £1.5 billion per year so far. But behind this figure lie real-world examples of how life has been made easier for all UK businesses, while retaining necessary protections. I could give a number of examples, but, for brevity’s sake, I will not. However, it is worth highlighting that much of the progress described in the business impact target clauses—the setting of the target, reporting against the target and independent verification—build on already established ways of working.

For example, Clause 25 creates a duty to appoint an independent body to verify the economic impact of new regulation in scope of the target. Currently, this function is performed successfully by the Regulatory Policy Committee, which verifies the impact of all measures in scope of one in, two out. The RPC also has a wider role beyond the proposals in the Bill. For example, it currently scrutinises the impact assessment for new regulation on the smallest businesses as part of the small and micro-business assessment process. It is the success of that approach that convinces me of the value of a long-term structure for regulatory management, which is why I support the introduction of a business impact target.

My third point concerns the provisions on statutory reviews of regulation. For too long, Governments of all types have focused on new regulation, rather than effectively managing their accumulated stock of existing regulation. Too often, I have heard from business groups that Governments have tried to remove regulatory burdens while at the same time new regulations kept piling over the horizon. When the Better Regulation Executive and the Cabinet Office began the Red Tape Challenge exercise, for example, we found that some departments did not even have a solid grasp of the regulations that they owned. They did not know what stock they had. Regular review of existing regulation to ensure that it remains fit for purpose in an ever-changing world is an essential part of good governance and, indeed, good policy-making.

Finally, I shall speak about the statutory definitions of small and micro-businesses in Clauses 33 and 34. I have no doubt that there will be further comments on this. We should be doing all we can to manage the often disproportionate effect of regulation on our smallest businesses. The clauses enable either exemptions or special treatment for small and micro-businesses in future secondary legislation. That will provide an important tool for future Administrations to design new regulations that are not just a one-size-fits-all imposition but are smarter regulations that recognise the significant differences between large and small businesses in the United Kingdom.

The regulatory reform measures in the Bill are an important evolution of the UK’s regulatory management structure. We lead the field in Europe. The Minister mentioned that we were second to Denmark in the “best place to do business” league in Europe. The truth is that we were top of the league and lost out to Denmark two years ago. We need to retain that position, and these measures will help us to achieve that.