House of Commons Hansard Debates for 7 Dec 1992

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small enterprises often do so. On the face of it they are self contained but often they operate under the constraints and indirect management of the large companies for which they provide services. There is a powerful argument that contracts established between small businesses and large multinationals in such circumstances should be controlled so that the small business is not so beholden to the large multinational that it cannot conduct its affairs in a fair and competitive way.

My hon. Friend the Member for Normanton also mentioned delays in payment by large companies. That is indirectly related to the regulatory regime. Small businesses often find themselves indirectly the bankers of the large multinationals by virtue of the policy of delayed payment of invoices and charges that they have incurred. That is a matter in which the Government could intervene directly by either introducing regulations or providing in the next Budget to ensure that small businesses are protected from such practices. It is clear that such practices are not only anti-competitive but can put small businesses out of existence.

Another aspect of the debate emerged today in a letter from one of my constituents. Mr. Brown has a small shoe repairing business. He wrote to me today saying that the proposed regulations on Sunday trading could put him out of business. I am aware that Sunday trading is not the subject of the debate but it must be considered when the House discusses the Sunday trading proposals. Whatever regulatory regime we decide to accept, we must take into account the small business sector. We cannot base our decisions solely on the interests of large supermarket chains, but must consider those of the entire retail and supply sector.

Mr. Neil Hamilton indicated assent .

Mr. Miller : I see the Minister nodding. That will be an important aspect of the Sunday trading debate.

Small businesses often tell me about their difficulties in getting what they see as a fair share of training resources. We have been told that the provision of the training and enterprise councils should have ensured that that problem did not exist. Many small businesses feel that they are disadvantaged over access to training, when compared with the local major players. Perhaps the Minister should study the regulatory regime which covers the TECs to ensure that small businesses are provided for adequately.

Several hon. Members have mentioned the building industry and clearly many small building companies are in extreme difficulties. The regulatory regimes that affect them could be improved and enhanced. However, as my hon. Friend the Member for Makerfield said, their needs go far beyond the realms of this debate.

The hon. Member for City of Chester referred to various phantom regulations. We can all quote chapter and verse of wonderful European Community stories, which inevitably turn out to be untrue, but are spread around by people--including some hon. Members--who do not have Europe at the centre of their hearts or wish to be at the heart of Europe. However, there are many real, and in some cases perfectly reasonable, regulations which need careful consideration. Neston is a beautiful sandstone town. I am sure that the hon. Member for City of Chester knows it, and as we both

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have an interest in historic buildings, I am sure that he would agree that no one would want the character of such a town to be destroyed. The small traders of Neston have a difficulty. They want to improve security and shuttering at night because of increased crime levels, which have affected many constituencies. The local authority has said, reasonably, that because of the nature of the town and the character of the buildings it would be totally improper to make the place look like Fort Knox of an evening. The town needs to retain its character. No one in the House is likely to disagree about the fact that the aspirations of both parties are reasonable. The Minister could help small businesses by seeking ways to intervene to assist financing of projects when the interests of small businesses are in conflict with those of the national heritage. I do not suggest that he should bail out large multinationals in such circumstances, but there is a powerful argument for better protection for the small enterprises which form the core of many of our small historic towns. As he is a Cheshire Member, I am sure that the Minister knows Neston. Perhaps there could be some improvement in the regulations governing the conduct of small businesses when they conflict with the proper interests of national heritage.

The hon. Member for City of Chester and I share another interest--the development of plain English, although sometimes his version does not coincide absolutely with mine. It is clear that many small businesses suffer because the forms and documents that they have to fill in are over- complicated and require them to engage laywers unnecessarily and at great expense. There is a powerful argument for regulations to require all Government Departments to ensure that documentation, wherever possible, will not require small businesses to involve expensive lawyers. That is not a plea for keeping lawyers out of everything. I know that some of them are also small businesses, but they are in a fairly privileged position. I fundamentally disagree with the Government's handling of some local authority agencies which have recently sought to assist small businesses. A number of agencies were established by local authorities in the 1980s, under the general title of enterprise boards. I am sure that the Minister could quote chapter and verse to criticise enterprise boards, but some extremely successful experiments were conducted. Lancashire Enterprises is still working extremely well and supports small and medium-sized businesses in the area.

There is a place in our society for local organisations which are accountable at a local level. There is an important difference between such organisations and some of the existing agencies. Local organisations could help to stimulate and to promote small businesses, as they have a specialist knowledge of the local area.

My hon. Friend the Member for Warrington, South mentioned the number of small businesses which exist as a spin-off from larger enterprises and referred to ICI, and that was an important argument. About a week ago, my hon. Friend the Member for Birkenhead (Mr. Field) told us about the huge number of jobs that hang on the back of Cammell Laird. Similarly, in my constituency there were 500 redundancies at Shell and, a few weeks before that, another 500 at British Nuclear Fuels. Because of the nature of those industries, they require a huge number of supply companies. As I said in the media when talking about the Shell redundancies, the knock-on effect will

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carry on right the way down the chain to the man on the street corner who sells newspapers to people coming out of the plant. The multiplier effect is well known.

The Minister may say that it is outside his brief to consider the major redundancies that hon. Members have mentioned, but the knock-on effects need careful consideration. I do not know whether that is intervention before dinner. We shall not go through that again as it was tedious when we first heard it because we did not believe it. We need some Government involvement to ensure that proper support is given to the many small businesses that are being hit by major redundancies in the north-west.

Finally, it is interesting to note that hon. Members representing constituencies in the north of England have made the largest contribution to this debate. A significant number of contributions have been made by my hon. Friends. Contrary to the popular belief of those on the Government Benches, as evidenced by their jeers from time to time, our party is not opposed to enterprise and small business. Far from it, we want to see a thriving economy that, by the very nature of modern industry--given the rise of new technology companies--will be represented by small enterprises. They will need positive Government support. They do not need interfering regulations, but supportive ones, as my examples about the shutters in Neston and bank charges illustrated.

The Government must also remember, as my hon. Friend the Member for Makerfield said, that the activities and management of large enterprises have an indirect effect on small businesses, perhaps through a shareholding, which is vital to the success of small businesses down the chain.

I urge the Minister to consider the importance of that relationship between large and small businesses when he replies to the debate. 8.51 pm

Mr. Neil Hamilton : With the leave of the House, I shall reply to the debate.

First, I congratulate my hon. Friend the Member for City of Chester (Mr. Brandreth) on giving me the opportunity to be here at this time of the evening. I had feared that I would be here much later, but, unusually, we have been able to have an extended debate on this important topic. I welcome that.

I welcome the fact that, as the hon. Member for Ellesmere Port and Neston (Mr. Miller) said, this debate has been dominated by the men of the north, including even the hon. Member for Jarrow (Mr. Dixon), whom I am delighted to see here. He took a fatherly interest in my career when I was in the Whips Office and I learnt a great deal from him which, should we ever go back into opposition, I shall put to good use. As that seems such an unlikely prospect, however, like so many of the qualifications that I have acquired during my life, I fear that those lessons will be condemned to eternal redundancy. I also welcome the fact that the debate has been dominated not only by Members representing the north but by those representing Cheshire, including the hon. Member for Warrington, South (Mr. Hall), whose constituency abuts mine. Who knows, but for my

intervention--canvassing in his constituency during the general election-- he may not have been here this evening. It is a great pleasure to welcome hon. Friends on both sides

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of the House to the debate and even one from the other side of the Pennines, the hon. Member for Normanton (Mr. O'Brien), who was brave enough to poke his head over the western side of that mountain chain, metaphorically speaking.

I am sorry that the hon. Member for Makerfield (Mr. McCartney), which is in Lancashire, has had to leave. He informed me that he had to go to Broadmoor ; I am not quite sure in what capacity, but no doubt that will be revealed in due course. I welcome all the contributions to the debate.

My hon. Friend the Member for City of Chester referred to the role that he had performed on behalf of the Prince of Wales and the Earl of Chester. I am not at all surprised that he has been selected to carry out that important role, because, before he became a Member, he was the clown prince of television. If one has a reputation for being amusing, however, it is difficult to convince people that one can ever be serious. I am afraid that my hon. Friend will have to bear that burden. I am sure that it is already evident to hon. Members and to his constituents, however, that the capacity to amuse is not at all inconsistent with the ability to represent one's constituents extremely effectively. My hon. Friend has already shown me in many respects that he can do that and I wish him a long and successful career in the House.

The subject of deregulation is extremely important. I must admit that I was somewhat disappointed when I assumed my office after the general election as the Minister for Corporate Affairs--in which capacity I am also responsible for company law--and took down two volumes from the bookshelf and compared their size. The 1980 Butterworth's Company Law Handbook had 486 pages, but the 1991 volume, which was the latest then available, had 3,544. That vast increase in complex legislation, no doubt much of it for desirable reasons, nevertheless demonstrates the increase in the regulatory burdens that have been put upon businesses of all kinds. Perhaps that is the most dramatic example of the way in which legislation has proliferated. In front of me on the Table are the bound volumes of the product of all our labours since I entered the House in 1983. It is a frightening prospect when one considers that we have visited those laws upon the people. No doubt there is much in those volumes that is good, but no doubt there is much that is redundant or that, in retrospect, we now believe, perhaps, we should have done in a different way.

My job, although it is consistent with the desirable objective of protecting the public in a variety of ways, is to ensure that the burden of legislation and regulation is no more than is absolutely necessary in order to provide the protection that, on other grounds, we think is appropriate. So often, however, regulation remains on the statute book for years, decades and sometimes even centuries after the need for it was first appreciated and after the circumstances which gave rise to that need have long since disappeared. There are all sorts of peculiarities on the statute book today at which we might be somewhat surprised. I have discovered that some of the more peculiar ones are in respect of betting offices. The Betting, Gaming and Lotteries Act 1963 (Schedule 4) (Amendment) Order 1986 makes the following requirement in a new para 8(i) :

"No apparatus for making information or other material available in the form of visual images"--

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in plain English that means a television--

"shall be used on the licensed premises unless those images appear on a screen ; and any screen so used shall not (a) exceed 30 inches wide."

I have no idea what gave rise to that restriction on the size of the television for use in a betting shop. As there is no restriction on the number of such sets that can be displayed inside a betting shop, the more innovatory of those establishments have attempted to get around the legislation by setting up a video wall of televisions.

In paragraph 10 we find the list of refreshments that may be sold on those premises which include,

" (a

(biscuits (not including cakes) ;)

(chocolates, sweets and similar confectionery ;)

(potato crisps, potato sticks, potato puffs and similar products made from the potato, or from potato flour, or from potato starch ; and)

(salted or roasted peanuts.")

That is clear enough, but the consequences of being so prescriptive is that one cannot sell prawn crackers, which are made from rice flour ; nor may one sell cashew nuts, almonds or any other form of nut. I shall not weary the House with the huge variety of such absurdities, but I hope that, over time, we shall be able to clear them from the clutter of the statute book.

Mr. William O'Brien : I followed that point with interest. The Minister said that only one Yorkshireman but five Lancashiremen had taken part in the debate, which shows that one Yorkshireman is equal to five Lancashiremen.

The Minister was correct to point out that some of the regulations still on the statute book are out of date and should be erased. Does he also accept that new regulations should now be introduced to defend the interests of small businesses?

Mr. Hamilton : In general, small businesses do not welcome greater regulation. Indeed, much of my time is spent discussing with them how we can reduce the regulatory burden on them, which serves no purpose other than to annoy. Where a case can be made for introducing regulations, we are prepared to consider it, but there must be a beneficial purpose behind proposed regulations. Moreover, the costs that they impose must be proportionate to the benefits to the public at large. It is not easy to generalise, but often in the past when we have decided to legislate or regulate we have not taken the cost into account. I am happy to say we shall now require cost-compliance assessments, where appropriate, when new regulations are proposed. That applies also to European regulations.

I hope that in future we shall make increasing use of risk assessment techniques, whereby we can try to quantify the risk which the public run by doing nothing and compare it with the cost imposed on business. After all, business is involved in wealth creation, which is also in the public's interest. If we think that the regulatory burden on business is excessive in relation to the proposed benefit to be bestowed on the public in some other way, whether it be environmental health, fire regulations or whatever, we shall take it into account in deciding whether to regulate. Often, that has not been done in the past, with the consequence that the volume of legislation with which we must now cope has been formulated without a rational basis--rational in the sense of choosing the level of

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regulation that we wish to impose, bearing in mind the associated costs. No regulation is justifiable unless we can perform the arithmetic of that equation, because until we know what cost we shall impose on business, we cannot take the overall view of the public interest, which is what good legislators should bear in mind.

Mr. Miller : Will the Minister be more specific about the question raised by my hon. Friend the Member for Normanton (Mr. O'Brien) about bank charges? Does he believe that regulations governing bank charges to small businesses should be tightened?

Mr. Hamilton : That is a matter of contract between freely consenting adult partners. I do not believe that it is appropriate for the Government to become involved in such matters, because if we sought to lay down the law on that matter, it would have repercussions on other banking activities. We might then find that certain functions were not performed by banks because it would not be worth their while to do so. We might find that the costs imposed by legislation would be recouped in other undesirable ways from people who would not reap the benefits of the lower bank charges advocated by the hon. Gentleman.

It is not a simple question. It is not sensible for the Government to become involved in the detail of contracts between individual businesses, lenders and borrowers because each case has its own facets and features. If we start to second-guess those decisions, we shall take a step down a road that leads we know not where. Consequently, if the Government take an intiative of the kind proposed by Opposition Members, they may find that, far from being the friend of small business, they are the foe, because banks would be less likely to lend in those circumstances. That would significantly inhibit individuals' ability to set up small businesses, which we hope will eventually become large businesses.

Mr. Miller : I am sorry to press the Minister further on that point, but I used the word "control", not the words "make lower". Does he believe that the Government should regulate or control activities regarding bank charges? I asked that question specifically because of the number of businesses that have complained about charges that have been unilaterally imposed on them from on high by the banking regime, putting pressure on those businesses. Does the Minister accept that that is an unfair practice? Against that background, does he believe that there is a place for control?

Mr. Hamilton : There is a multiplicity of sources of lending. If it is a profitable way of doing business, it is possible to incorporate into any contract for borrowing and lending the type of legislative clauses that the hon. Gentleman implies.

I think that it is not for Governments to lay down the forms of contract that banks should be obliged to use in lending to customers. One of the consequences of such a prescriptive approach might be to encourage banks to make loans that are not good loans. We have seen the results all too clearly and dramatically in recent years : the costs of the losses are redistributed among other customers. It is wrong for the Government to seek to second-guess such decisions, which ultimately are not costless. The repercussions of the decisions are often not foreseen, and when they come back to haunt us we regret that we took them.

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Mr. William O'Brien : Will the Minister give way?

Mr. Hamilton : I must move on to the more general points that I wish to make on deregulation rather than remain on the narrow issue of bank lending, important though it is to individuals. I shall press on with the few general points that I wish to make.

Mr. O'Brien rose --

Mr. Hamilton : I shall not give way. I am sorry. I think that I have been generous in allowing hon. Members to intervene. We can argue the matter on another occasion. The hon. Gentleman may be fortunate enough to secure a debate on the Consolidated Fund Bill, to which I shall be happy to respond at about 4 am in a week's time--I say that with tongue in cheek.

The issue of deregulation goes far and wide. I shall confine myself to the general principles that apply to what the Government are seeking to do in this Parliament to take forward an important task. We wish to reduce the burdens on business and hence encourage the wealth-creating process that we all want to see.

My right hon. Friend the Prime Minister has charged me in particular with the duty of making myself the most hated Minister in Whitehall--not with Opposition Members but with my Front Bench colleagues. He has authorised me to enter every Government Department and to require each individual deregulation Minister to produce a list of regulations for repeal and simplification. Anyone who knows anything about Whitehall will know that my task will not be an easy one to perform. The culture of Departments is regulatory and not deregulatory. We must change the way in which legislators and civil servants think about the way in which they do their jobs. We must get them to bear firmly in mind that, when we introduce regulations, we are often imposing a cost burden on business and, therefore, an inhibition on the wealth-creating process. The consequence is that we must each examine our own conscience and examine also the accumulation of legislation which we have inherited from our predecessors in our respective Departments. The examination must be carried out in accordance with the searching test that I have described.

My right hon. Friend the Prime Minister is taking a close and personal interest in the initiative, the prime responsibility for which he has entrusted to my right hon. Friend the President of the Board of Trade, to whom he has given the task of hacking away the jungle by which we are beset. That is something that my right hon. Friend will carry out with great gusto. I hope that within a short time we shall be able to produce our first checklist of legislation for repeal or simplification to achieve a positive and worthwhile objective.

In the coming months, I shall report regularly to the House. My right hon. Friend the Prime Minister also wants me to report to him every month on the progress of this initiative. That should be a signal to all my right hon. and hon. Friends that they need to take it seriously. This is an opportunity as great as, if not greater than, the one that we seized in respect of the citizens charter, which was designed to make public services more user-friendly and responsive to the citizens who, through their taxes, pay for them. In this case, we have what is probably a much greater opportunity to improve this country's wealth-creating potential and hence the employment-creating potential of the economy.

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I can illustrate that by giving a simple example of how we can stop onerous legislation being introduced and make the burden of legislation more suitable to the task set for it. Recently, the Home Office introduced draft fire regulations in pursuance of a new European Community directive. As originally drafted, the Association of District Surveyors estimated that it would impose a cost burden of £8 billion on industry. The deregulation advisory panel in the DTI, composed of private sector business people who will have to cope with these regulations, made representations, together with others, with the result that the Home Office has withdrawn the regulations and will significantly reduce the impact on business--without doing violence to our proper regard for the protection of the public. Premises in which people operate must of course be safe for use, but it is absurd that a one-man business operating from home should be required, as it would have been under the original draft, to reverse all the doors through which the public might pass so that they open outwards, not inwards, under illuminated signs saying, "Fire Exit". That would have happened had we not sent the draft regulations back for translation into more acceptable form.

There is much that we can do ; we must examine what has gone and what it is proposed shall come--not only in Britain but from the European Community. We are anxious not to over-implement the obligations that we assume through the EC, thereby imposing a competitive disadvantage on our firms.

I shall not be able to answer all the points made in this debate, but I shall do my best to respond to some of them. The hon. Member for Normanton referred to several issues, including bank charges, with which we have already dealt. He asked whether we could introduce new regulations with respect to the national non-domestic rate. I am surprised that he, as a northern Member concerned about manufacturing industry, should ask for that. The new business rating system has resulted in an enormous transfer of resources from the south to the north and from service industries to manufacturing industries. Given the interest shown by Opposition Members in these subjects, I am surprised that they should be so ungracious about the system that we have introduced.

Mr. William O'Brien : Once again, the Minister has missed the point, just as he did with bank charges. The contribution from the profits of small businesses to the rates works out at between 25 and 30 per cent. The contribution from the profits of larger companies to the rates is about 2 or 3 per cent. So regulations act against small businesses. When the latter experience trouble making ends meet, they should be eligible for a rebate.

Mr. Hamilton : The hon. Gentleman is arguing for a form of corporation tax, which is paid according to the size of a company's profits. If he thinks carefully about that, he may realise that that will not do many small businesses a great favour. It is a big step : the abolition of the rating system as we know it--the very system that the Labour party has been arguing that we should bring back in respect of domestic properties. It will be interesting to see how the hon. Gentleman reconciles those two positions--but on another occasion. The hon. Members for Warrington, South and for Makerfield--

Mr. O'Brien : Will the Minister give way?

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Mr. Hamilton : Perhaps the hon. Gentleman will forgive me if I do not, because I am about to deal with a matter of great importance to Cheshire Members. I should like to reply to the issues raised about ICI, which is a major employer in my constituency at Northwich. ICI Pharmaceuticals is also located at the other end of my constituency at Alderley Park. I have had close co-operation with ICI throughout my career in the House. I spoke to Sir Denys Henderson and his senior colleagues only last week and one of the complex topics that we discussed was energy prices.

The powers that Opposition Members imagine we have are not available to us. Electricity is now a regulated industry and the regulator's role is laid down by legislation. His job is to balance the interests of consumers and producers and to ensure that there is no discrimination. The generators and the regional electricity companies operate under licence and their operations must reflect the wider concerns of the new regulatory regime. It would be wrong for us arbitrarily to select individuals or companies to receive power on a discriminatory favourable basis.

I fully understand ICI's concerns. It wants to dedicate the output of one power station, Ince power station, to Runcorn. As the hon. Member for Warrington, South said, fairly, ICI consumes 1 per cent. of the entire output of Britain's electricity generators. One of the reasons for price increases being as great as he said is that, under the previous system, ICI was able to make use of the marginal tranches of coal for which a marginal cost was levied under the special qualifying industrial users scheme introduced by the Government. The consequences of the phasing out of that scheme is that a return to normal levels of pricing from a low base gives the impression of large and unjustified price increases.

I have told ICI that we shall consider its case and if we find a means of addressing its concerns which does not do violence to the general principle of competition and fair and equal dealing between customers, we shall assist. This is a complex matter, and it is not for me but for my hon. Friend the Minister for Energy. We are in close contact with ICI and shall give the greatest consideration to its arguments.

Mr. Hall : I listened with great interest to what the Minister said about the regulatory framework which has dictated the 60 per cent. increase in ICI's electricity charges over the past 18 months. There is a way around the problem. Does the Minister accept that the regulatory framework was introduced by his Government on the privatisation of electricity?

Mr. Hamilton : I am happy to accept that, because, as a consequence, the average electricity consumer is now paying 11 per cent. less for his electricity than he was paying before the regulatory regime was introduced. We are discussing changes in the relativity of prices. Customers who previously enjoyed low electricity prices

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have had greater than average increases as a result of phasing out discrimination. Overall, the consumer is paying less for electricity, but by implication some consumers must be paying more. That does not sit well with the arguments of the hon. Member for Makerfield and others who asked for special treatment for British Coal.

Coal prices are the principal ingredient of electricity prices. The average price of coal produced by British Coal is £43 a tonne, compared with £33 a tonne on the spot market, and the considerable burden of that extra cost is placed on all power consumers in this country. I am happy to congratulate all those who work in our coal industry on the massive increases in productivity that have taken place over the past six years and on the enormous strides towards converting what was fast becoming an industrial museum into a modern and competitive industry. If such steps had been taken earlier, we would not be facing such severe problems now.

We cannot on the one hand argue that there must be no electricity prices and on the other hand support practices that produce high-cost coal. I do not want to be led into an argument about the coal industry, because it is not a small business, and I think that you, Madam Deputy Speaker, would rightly call me to order for straying more widely than the title of the debate should allow ; but, as the point was raised in the debate, I felt it right to make some reference to it in my reply.

The hon. Member for Ellesmere Port and Neston made a number of points. I was particularly interested in what he said about the impact of regulations on small businesses in conservation areas and other heritage locations : I am a strong supporter of regulation in that context. I am very interested in the "built heritage" of this country, and in the maintenance of historic cities such as Chester and the many agreeable towns that can be found in Cheshire and other counties in the north-west--some of them in my constituency. We must tempter the zeal for regulation with some moderation, but I do not believe that the two need be inconsistent. I think that we can have regulation without making it too burdensome for businesses. Much of the regulation that preserves the historic continuity of our conservation areas need not impose any cost on business ; in fact, to the extent that it prevents them from making costly but ugly changes to their premises, it could benefit them in terms of competition. The Government are determined to make considerable strides in the current Parliament to reduce the regulatory burden on business. If we failed to do that, we would fail in our duty, because it is by that means that we can increase the wealth- creating potential of this country--and from that will come the jobs that hon. Members on both sides of the House desire to see.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes past Nine o'clock.

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