Examination of Witness

Deregulation Bill – in a Public Bill Committee at 9:31 am on 25th February 2014.

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Mike Spicer gave evidence.

Q 46

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

We will now hear oral evidence from the British Chambers of Commerce. For this session, we have until 10.30 am. Will the witness please introduce himself for the record?

Mike Spicer: My name is Mike Spicer. I am director of research at the British Chambers of Commerce.

Q 47

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

Maybe you could start on clause 1 —I know you are willing to be questioned on three or four clauses—which is to do with health and safety and the self-employed. As someone who was previously self-employed and working in an office himself, what do you think will be the most significant benefits, if any, of the exemption?

Mike Spicer: I think the exemption will clarify the position for self-employed workers. I have to apologise; I only had the list of prescribed sectors as of yesterday.

Mike Spicer: As I understand it, there will be a thorough consultation with business representative groups as well about the content of that list, and that is something we would support. I would like to make two points. The first is that as a principle, what this does is remove what we perceive to be some of the gold-plating around health and safety regulations by introducing the exemption for self-employed people, but, as has been brought out in the last session and others like it, it is clear that in some industries, such as construction, there are unique circumstances. That is why it is important to have the prescribed list of sectors. For us it provides a lot more clarity.

If you are a self-employed person sitting in front of a desk at home in a service-based industry—for example, if you are an internet start-up or whatever—you might be unsure about how health and safety regulation applies to you personally. What I have heard others say is, “Well, if they do not know what it is, does introducing a change really make any difference?”, but I do not think that is any reason not to introduce it.

Q 48

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

Can you point to anything positive that someone in precisely that kind of circumstance would no longer have to do that they previously would have, or is it simply a question of perception?

Mike Spicer: I think it is both, actually. If you are not on the prescribed list of sectors, as I understand it, you will not be required or will not have to carry out a risk assessment. If you are in an industry that is not on the list—as I said, there will be further consultation on what is included—you will not be required to carry that out. However, I think there is a perception issue, which is, in a sense, more important than that. There is a perception, certainly among those looking to start up a business, that it is a difficult, costly thing to do, and there are lots of regulations out there. You do not always necessarily understand how they apply to you and I think this clarifies how aspects of the law apply to you personally.

We also think, as we said in our witness submission to the earlier draft Bill, that aside from the change itself, the information function of the Health and Safety Executive is just as important—in some ways more important here. We would like to see that protected. It is important that, when changes such as this are introduced, they are communicated very clearly to the business community or to those who are about to join the business community by setting up their own business.

Q 49

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

Perception is important. In terms of what you have just said, someone in that circumstance would not have to carry out a risk assessment now under the law. I recognise—and this is perhaps where there is a job for all of us—that the more we talk about burdens the more we create a disincentive for people to set up a business. No one has yet been able to come up with something specific that businesses would not have to do any more, so it then all ends up being about perception.

As someone who has set up my own business, I know that no one goes into business because they want to do more bureaucracy. People want to get on with doing business and selling goods. When the Conservative party was in opposition, it talked about burdens—all of us in  business do—but sometimes it is important to ask what it is we are talking about. If we went to your members and said, “After all the talk there has been about regulation we now have a Deregulation Bill, and this is what it means,” do you think there would be a sense of disappointment that the Bill is the answer to all the talk we have heard over the past 16 years?

Mike Spicer: I do not think that we can look at it in isolation, because there has been a broader sweep of changes to the regulatory burdens that businesses have faced over the past several years, stretching back more than one Government. We have had changes to the regulatory architecture, there has been the introduction of the regulatory policy committee and so on, so this is one—admittedly small—part of a bigger picture of deregulation and changes to the regulatory architecture.

I do not think that this, on its own, is likely to have a huge impact on businesses’ perception of the regulatory burdens they face. Nevertheless, it is a welcome clarification of the law as it stands. As you alluded to, if this matter gets air time and we talk about it, we have our role to play as a business organisation in communicating the changes to members as well. I think it is a welcome clarification and provides a bit more clarity about what is expected of you as a self-employed person.

Q 50

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

You say it will not make a big difference in terms of perception, but will it make a big difference in terms of practical application?

Mike Spicer: As I read it, the impact assessment stated that it expected, or the analysis had shown, that the direct impact in terms of cost would be small. The saving was estimated at about £300,000. In the grand scheme of regulatory burdens, that is quite small, but if it makes it easier for businesses to understand what is expected—with carrying out risk assessments, for example—it might make some changes. The broader impact, of how this fits into the broader picture of deregulatory movements, is harder to monetise from our perspective.

Q 51

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

Finally, in 2010 the World Bank said that Britain is the easiest place in Europe to set up a business, and one of the easiest in the world. My worry is that the message we send to business is that it is difficult, frightening and dangerous. Actually, we have seen loads of people setting up businesses, as we often do in a recession, but the Bill potentially puts in place a barrier for those people who at the moment are self-employed and thinking of taking that big step of taking on their first employee. We are saying to them that the moment they go from being self-employed to having an employee, it all becomes dangerous and difficult, and there are loads of things they are going to have to comply with—we build a monster in people’s minds that does not actually exist.

Do you share my concern that if we create that sense, when someone then thinks, “I am doing pretty well, so I want to take staff on,” they will also think there is something to be worried about if they do?

Mike Spicer: I will make two points. The first is that I think you are right that there are cliff-edge effects in legislation such as this that we have to take account of. It is broader than just this change: if you look at the tax system, for example, or at the aspects of the regulatory  system that introduce small business exemptions, and so on, there are cliff-edge effects, and we have to manage and look at those closely.

There is a broader context to all this, however, which is that, first, although the UK does relatively well in its performance in setting up new businesses in a European sense, in a more global sense in performs less well. We have to look at what reasons are behind that. There is a complex picture out there that encompasses access to finance and a whole host of other things, but I believe that what we are doing in this particular case is just aligning Britain’s approach to the regulation of the self-employed with best practice elsewhere in Europe and in the world. I do not believe that this, on its own, is likely to introduce such a big cliff-edge effect that it will have an impact on the rate of start-ups.

Q 52

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

We heard from IOSH earlier that there is already considerable confusion among the self-employed. IOSH said that some people were doing something, some people were not doing anything at all and people did not know what they had to do. Mike, would you agree that having defined activities that will be covered by health and safety for the self-employed is a clarification in itself?

Mike Spicer: Yes.

Q 53

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

I have lot of sympathy about the cliff edge in taking on employees, but the vast majority of self-employed people never take on an employee. Is that not another opportunity for Government to give a lot of support to self-employed people who are thinking about taking on employees? That is where we should be targeting the next lot of business support going forward. Will you comment on the growth duty for non-financial regulators as well?

Mike Spicer: Yes. Taking your first point about whether this is a clarification, yes, we do believe it is. On your second point that the Government should be doing more to help businesses grow beyond being one-man bands and into bigger companies, of course we certainly support that. As chambers of commerce, we see day in and day out the challenges that businesses face, and we help businesses through that process.

On the growth duty, to echo what I said earlier about the prescribed list of activities, I only saw the draft guidance to regulators on that yesterday. I do not know if we are all in the same position on that. With the growth duty, our position is quite simple. For the longest time, the British Chambers of Commerce has campaigned for more common sense in UK business regulation. That is not just about the regulations that businesses face; it is also about the relationship between regulators and the regulated.

If you look at some of the local pilots on improving relationships between regulators and businesses—for example, the “Better Business for All” pilots in Leicestershire and Birmingham—you will see some really good examples of how those relationships can improve and the benefits for business growth that come from that. We believe that we should strive for positive relationships between businesses and the regulators, within reason, but that there is an opportunity to improve relationships. That is what local pilots show, so we support the growth duty.

Having said that, as a caveat, we are not naive about the difficulties that the introduction of a broad-based measure like a growth duty might encounter if a lot of different non-economic regulators are operating in this country, all of which will have their own set of compliance regimes within which they operate. There is clearly a need to look closely at how that is written down in law, but we agree with the principle that regulators should have regard to the desirability of economic growth.

Many regulators would say, no doubt, that they already operate to that effect, and in certain parts of the country the feedback that we get is that some regulators are better than others in that regard. I think that a broad-based measure like this is welcome in principle; we just need to see the detail.

Q 54

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee

To return to the health and safety issue, I wonder whether the Government are being far too timid and whether you would support a change that went further. If, as a sole trader in Southend, I set up a business selling rugby shirts in competition with Toby, I understand that it is just me, and under the new regulation I have no health and safety concerns. However, if I take on John as a partner and we both have a 50% equity share, two people are then involved in the business, and suddenly we have health and safety concerns. If both of us set up separately in competition with Toby, we would not have.

I am very conscious, having set up a couple of businesses myself, that sometimes they are set up in an unstructured way. It is not just one person; someone who might be a business partner in the longer term is just someone to discuss things with early on. Should the Government not be bolder and include partnerships or exemptions for that early stage, when people might be working for free and there is not an employment relationship?

Mike Spicer: Given the issues that surround that, that is something that we would want to test with out members. If I can be straight, that is not something that we have tested with members specifically, but we would be happy to get back to you on that.

Q 55

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

May I bring you back to the growth duty? Could you give Members some concrete examples that illustrate what sort of impact you think this could make to your members?

Mike Spicer: Some practical examples would include regulators working more closely together to align their regulatory activities. Again, I am thinking about some of the local pilots around promoting better relationships. The kinds of changes that businesses have seen on the ground, for instance, are where you have more than one non-economic regulator co-ordinating their visits to a site to minimise the amount of time devoted to compliance activities. That is a practical example of where you have non-economic regulators that have that kind of a duty written into their objectives, and there is the opportunity to work more closely together with each other and businesses to minimise the impact of regulatory burden.

Q 56

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

To what extent have your members put pressure on you to try to get these changes through? Is the need for a growth duty at the forefront of their minds?

Mike Spicer: The growth duty is something that we agree with in principle, and the principle of regulators having regard to the desirability of business growth—or economic growth, as it is more broadly stated here—is something that we encounter a lot.

When we ask businesses about the sort of issues that concern them, they tend to talk about the burdens of regulation in a more general sense. When we tend to go down a little bit further and say, “Which specific regulations or aspects of the regulatory regime that you face most concern you?” the thing that tends to come back is, “Actually, we would prefer to have a relationship with our regulator where we can approach it, without fear, for advice on compliance issues.” The growth duty speaks to that concern and makes it more likely that they will be able to approach their regulators like that.

Q 57

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

May I ask you a question on something that has not come up yet—apprenticeships? Through the Bill, the Government seek to give greater powers to businesses to be involved in apprenticeships. Perhaps, in some respects, businesses do not want that, because that would be an extra activity to undertake. What is business’s view on whether they want to have a greater say over the way that apprenticeships are structured?

Mike Spicer: I think they support in principle the idea of apprenticeships being about meeting a particular standard. Let me give you a concrete example of what I mean. Let us say that you have an apprenticeship in mechanics and you have one business that builds buses and another that builds cars. There are subtle differences between the kinds of work that you would be doing in both cases.

The sort of feedback we have had is that businesses would prefer a system more tailored to the needs of those individual industries but that, nevertheless, gives them confidence that the apprenticeship meets a certain standard. That is an example of where, for apprentices, industry working together can promote a particular standard in mechanics, let us say, but, at the same time, their experience is more tailored to the work done within that particular business. Therefore, they could achieve that standard by working in one context or another. That is something that we have had quite a lot of feedback on from businesses, and they welcome it.

Q 58

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

Do they have an appetite to take on a greater degree of responsibility for the funding aspects?

Mike Spicer: The limited feedback that we have had on some of the proposals on, for instance, using the pay-as-you-earn system shows that there are mixed views out there. There is general support for the principle of apprenticeships and training more generally being more in the control of businesses and more demand led, but, on the other hand, using the PAYE system potentially brings in complications and burdens that were not there before. Therefore, without further information on that, it is difficult to say.

Q 59

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

Is there a different model they would prefer in terms of channelling the funding?

Mike Spicer: We have not had feedback that there is one model out of the several that are on the table. You could imagine funding models where grants are placed directly in the hands of employers, and then there is the  option of clawing it back through the tax system. There are a number of options. We have not had feedback that any particular one of those is the favoured model, only that using the tax system—PAYE in this case—has some difficulties, particularly on whether it would clash with other elements of the tax system and how that would work out.

Q 60

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

Looking at the list of proposed regulators, have you had any feedback or ideas from your members about how the Drinking Water Inspectorate, which is supposed to keep our water clean, or the Office for Nuclear Regulation, which is supposed to stop nuclear power stations from blowing up, can encourage growth?

Mike Spicer: We have not had feedback on those specific regulators. Where we have had feedback, as I said, from the local “Better Business For All” pilots in the east and west midlands, it is that there is scope for regulators to work more closely with each other in terms of the timing of inspections and things like that, and to work with businesses to be seen not only as a regulator or a kind of external force, but as a helpful and critical friend, by being a body that they can go to for advice on compliance issues.

I cannot comment on the specifics of the two particular regulators you mentioned, but what I can say is that there is a lot of support for the principle.

Q 61

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

While I understand the principle across the board, can I put it to you that, having worked in the nuclear industry myself, the only companies that the ONR regulates are what is now EDF, what was British Nuclear Fuels and one other company? These are multi-billion-pound businesses, and it is in the public’s interest for the inspectorate to be able to turn up unannounced at a nuclear power station. Would you be surprised if your members could think of ways that the nuclear inspectorate could make life easier for the multi-billion-pound industries as a priority?

Mike Spicer: The way we would see it is that there are a whole host of potential avenues for improving the relationship between the regulated and regulators. As I said before, some of the examples that we have seen on the ground have been simple things, such as better alignment of regulatory activities, for example, site visits.

In the cases that you have just mentioned, we are talking about regulators in specific cases, so I cannot comment on those cases specifically. We have not had any feedback from our members on those cases specifically, but I am happy to get back to you on that.

Q 62

Photo of David Rutley David Rutley Conservative, Macclesfield

One thing we have not touched on so far is clause 2. I just wanted to check what the BCC’s view is on the proposals to remove tribunals’ power to make wider recommendations.

Mike Spicer: Our view is that it is an admittedly small but welcome move. We know that tribunals rarely make recommendations, so we are not necessarily talking about a big saving in terms of direct cost.

What we and our members are concerned about is more to do with the impact that having that power might have on an employer’s decision to fight a case in tribunals. Recommendations made by tribunals are public,  so there is a potential reputational impact of making recommendations. Our concern is that it may be swaying some employers to decide one way or another whether they want to contest a case. As I said, it is a small move, because it is rare for tribunals to make recommendations. Nevertheless, we welcome the move.

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

I want to make a point based on the previous evidence. Both Sarah Veale and I served in the Löfstedt review back in 2011, which is some time ago. It would appear that we have a different recollection of Professor Löfstedt’s recommendations. May I suggest to the Committee that we write to Professor Löfstedt for his view on clause 1 as it stands? That would be useful for clarification.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

It is not for the Chair to accept suggestions from Members during an evidence session. The point of evidence sessions is to take evidence from witnesses. Any comments on the evidence can be discussed in Committee.

Q 63

Photo of David Rutley David Rutley Conservative, Macclesfield

Going back to the new growth duty, again you have spoken eloquently on the subject, but I want to check BCC’s perception of whether this will help to reduce compliance costs for your members and how BCC will want to work with the Government to ensure that non-economic regulators follow through and deliver on the approach as we envisage it?

Mike Spicer: I think ongoing consultation with business representative groups, both in the way that the guidance is put together and in terms of any post-evaluation work would be welcome. Our businesses are capable of providing feedback on changes on the ground as they perceive them and are always happy to feed those back into the Department for Business, Innovation and Skills and the Government more widely. We all continue to do that.

As for whether the growth duty as it is written is likely to reduce compliance costs, we certainly hope so. When something is broad and principles-based, as this duty is and as the draft guidance is currently written, there is undoubtedly an issue about how to turn it into specifics on the ground. As I understand the draft guidance, the anticipated process from here to when the guidance is finalised is that individual regulators will be responsible for incorporating that into their objectives, their published standards of service and so on. That is something that our members can feed back on directly.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

I am afraid that this will probably have to be the last question as it is now 10.27 am.

Q 64

Photo of Chris Williamson Chris Williamson Labour, Derby North

I noted your response to the question about moving the power of tribunals to make wider recommendations. Will you comment on whether you think that will lead to your members amending their practices when they lose a tribunal, or is it likely to improve the situation in terms of them amending their practices? Will it have an effect either way?

Mike Spicer: I think the very small number of cases in which tribunals make recommendations indicate that it probably would not make a lot of difference because we are talking about such a small number of cases.  Since the power was introduced, I think I am right in saying that we are talking about perhaps three dozen cases. The numbers involved are small. It is harder to say how the broader impacts would play out because the feedback we have had is that it is more to do with the decision to fight cases in the first place. This is a fairly new power. It was introduced fairly recently, just a few years ago. I do not believe there is any reason to expect a huge negative impact from removing it.

Q 65

Photo of Chris Williamson Chris Williamson Labour, Derby North

But if a tribunal made a wider recommendation, do you agree that not only might that have an impact on the employer involved, it might have a wider impact on other employers who might take cognisance of it? In the absence of that, could bad practices then continue?

Mike Spicer: No, because I believe there are other ways to promote best practice within an industry. Many industries, if not most, have representative bodies that are responsible and do great work in promoting best practice across the industry. I do not accept the idea that removing the power of a tribunal to make recommendations when historically tribunals have very rarely made recommendations is likely seriously to undermine the efforts of industries and individual sectors to promote best practice among themselves.

Q 66

Photo of Chris Williamson Chris Williamson Labour, Derby North

It might mean, though, that some employers do not realise that they are engaged in an unacceptable practice that they might otherwise have been able to tackle had they had the benefit of the wider recommendations being made.

Mike Spicer: I just reiterate that there are numerous channels by which bad practice can be exposed and good practice spread and shared.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

I am afraid that brings us to the end of the time allotted for questions. I thank the witness on behalf of the Committee.