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Judy Mallaber: The hon. Gentleman may be interested in my previous experience as an employer in a small organisation. By helping to rearrange someone's working hours, I saved the money that would have been spent on advertising to recruit a highly skilled employee and on training that person. Employers can cut costs in that way.
Mr. Simmonds: Does my hon. Friend accept that we must consider not just the direct impact of the Bill but the administration that will ensue, particularly in small businesses that do not have personnel departments? That will be the real impact on the running of the business.
Mr. Osborne: My hon. Friend is right; real indirect costs arise from places being left vacant that are difficult to fill. Does my hon. Friend the Member for Runnymede and Weybridge wish to pursue his intervention?
Mr. Hammond: Is my hon. Friend surprised that, notwithstanding the lessons of history, hon. Members on the other side still apparently believe in the power of the statute to tell businesses what they should do in their own best interests? Does he not find that quite startling?
Mr. Osborne: My hon. Friend is right: that is indeed striking. One of the things that I would have expected the Labour party to learn from the supply-side reforms of the 1980s is that we cannot continue piling costs and legislation on businesses without having an effect on their competitiveness. When economists and historians look back on this period of history, they will judge those supply-side reforms to have laid the foundation for the strong economic growth that we have enjoyed for the last 10 years.
There is no real evidence of what impact the Bill will have on businesses and on society. Anyone who has read the regulatory impact assessment will know that it uses fantasy figures to try to calculate the possible costs and benefits to employers, which are almost impossible to calculate in advance. It would surely be much more sensible to ask businesses what the costs were likely to be. It has been suggested that that would represent an extra cost to businesses, but in my experience, small employers are only too happy to tell me what the costs of Government regulations have been for them. They have always been very happy to volunteer that information.
Mr. Osborne: I thank the hon. Gentleman for making that point. Businesses are already paying through the nose to the Government because of the huge increases in business taxation that have been piled on over the last four years. Frankly, we cannot ask them to pay any more.
I want to begin by looking at new clause 4. At the beginning of Second Reading and in subsequent claims and comments by the Secretary of State and the Minister, we heard proudand, I think, genuineclaims about the potential for the Bill to improve the situation in the workplace. In a letter to all colleagues in the House, the Minister stated:
New clause 4 would enable an accurate assessment of the costs to ACAS, and thereby allow it to plan. That is particularly important in the light of the Minister's interesting comment that he foresees that the number of cases coming before employment tribunals will probably rise in years to come, despite many earlier statements to the contrary by him and his colleagues. It is right to bring that principle of assessment to the heart of a vital part of the Bill.
Although I do not want to overdo the cross-party consensus, I strongly support the request from the hon. Member for Wolverhampton, South-West (Rob Marris) that the Minister make it clear that resources will be forthcoming. New clause 4 would allow him to ensure that those resources are accurately identified and brought forward appropriately.
If I may, I shall discuss new clauses 1 and 3. On publication, the Bill was accompanied by an initial estimate of costs and benefits. I have in front of me the explanatory notesall Members will doubtless have read them from cover to coverwhich set out how the costs
There is a flaw, however. Although I do not intend to be prejudicial about its content, this is not a complete Bill. It is an enabling Bill that is merely a framework. Throughout our deliberations in Committee, the Minister and his hon. Friends told us that the Bill will lead to many regulations, so the danger is that to rely on the initial regulatory impact assessment is to consider an incomplete Bill. To do so is like paying merely for the first and main courses in a restaurant without taking into account the pudding and the wine bill.
The difficulty is that regulations have not been tabled, so they cannot be costed. The £272 million is the beginningthe minimum. The danger is that, when those regulations are enacted, the House will be unable to consider and itemise the costs. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) rightly said, those costs could well be substantial. That is my concern.
On the right to request flexible working, the Government produced in Committee, rather belatedly, a subsequent regulatory impact assessment, albeit that the Minister was open enough to point out that it is a partial assessment. I realise that members of the Standing Committee are probably worried that my enthusiasm for reading regulatory impact assessments might not be good for my long-term health, but I pursued the matter and went through the assessment in great detail.
It became apparent that the new clause on flexible working, which was introduced at the end of the Committee's deliberations, adds £38 million in the first year and a further £286 million every year thereafter. As the mathematicians present will understand, that is not merely a small increase in the original bill of £272 million. The increase resulting from introducing one extra clause more than doubles the original cost. The annual cost of this Bill was initially £272 million. It has now risen to £558 millionand, as I say, I fear that that is only the price of the dessert. Perhaps we have not yet considered the price of the wine and the petits fours.
My first reason for supporting new clause 1 is the need for a comprehensive assessment of all the costs. My second is that it rightly seeks to distinguish between different employers, and between different burdens borne by employers. Because the Secretary of State has reserved a number of powers, we do not yet know how they will impact on the various players. We therefore need an assessment that is comprehensive, and also distinguishes between different types of employer.
The creation of new rights, and the cost of administering them, will always pose fewer difficulties for larger employers. As my hon. Friends have pointed out, a large company with a human resources or personnel department will be able to deal with such matters. However, the Bill will impose a huge new set of burdens on small employersnot least the increased time that will have to be spent on ensuring that the business, perhaps a family firm, is sticking to the letter of the law.
To be fair, I must add that the Government have acknowledged in the explanatory notes and the regulatory impact assessment that the Bill will place a disproportionate burden on small employers. Notwithstanding Labour scepticism, I think that the burden will be experienced in two ways. First, there is the problem of time. The Bill contains 53 clauses and seven schedules, and heaven knows how many amendments will be made today. Small businesses will have to try to understand the rulesfor instance, those governing the three-step process of dispute resolution. It will take time to understand, implement and verify each of those steps.
Many small firms are already struggling with the volume of paperwork with which they must deal. I am told by a number of small business organisations that the average small family firm must now spend up to 31 hours a month, the equivalent of four working days, simply complying with existing regulations. That is an appalling statistic, and I fear that the Bill will impose further burdens of time and pressure.
The second problem is this. While a company employing 100 or 200 people will be able to cover absences for statutory maternity or paternity leave if four or five people have rights to such leave, the burden will clearly be much greater for a small family business employing only four or five people when two people wish to exercise their rights. Although elements of the Bill acknowledge the existence of the problem in financial terms, I am not sure that it has been fully acknowledged.
The Bill tries to be family friendly; butI think I made this point on Second Readingwhat about the father or mother who must spend time in the evenings and at weekends dealing with paperwork for the family business, rather than spending it with the family itself? That is one of the potential conflicts at the heart of the Bill. It is friendly to some families, but not to all.