Previous SectionIndexHome Page

7.17 pm

Mr. David Ruffley (Bury St. Edmunds): Much of the Bill is unnecessary, some of it is ill thought out, and very little of it is to be broadly welcomed. It will not make a major contribution to closing the productivity gap, which is the Chancellor's objective. That objective can only be delivered if Ministers use their time a bit more wisely and legislate to reduce red tape and to simplify the British tax system. I fear that those aims are beyond new Labour Ministers.

Instead, there is a flurry of press releases, White Papers and consultation documents inspired by a Chancellor whose misplaced sense of machismo about being pro-enterprise is just an excuse for one more headline. Never mind that the Competition Act 1998 has hardly had any time to bed in; the Chancellor wants another Bill to show that the Government are doing something. Never mind proper parliamentary scrutiny—we have already heard that the Bill will have a minimal amount of time spent on it in Standing Committee. But that does not bother the Chancellor in the pursuit of his big idea.

All the rhetoric and spin in the press, of which we have heard much in the debate, conceals one basic fact—at bottom, new Labour does not understand what enterprise and competitiveness truly demand. If the Government

That is not a quotation from my admirable and excellent colleagues on the Front Bench. It is the judgment of the Financial Times with regard to the Bill, contained in its 27 March editorial. That view was also expressed in The Independent on the same day, when it stated that the Bill contained

The Chancellor and I agree on one thing at least—that raising UK productivity levels is essential to driving better economic growth, keeping borrowing down and keeping price levels low and sustained. However, the facts since 1997 show that productivity has not improved. The December outlook figures from the OECD show that the average annualised rate of productivity growth was lower in the past four years than in the preceding four. That is all the more worrying and depressing because the Conservative Government bequeathed to the Chancellor

10 Apr 2002 : Column 80

an economy in fine fettle—the result, in large measure, of the decisions taken by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke).

Of course, the problem of UK competitiveness goes beyond the basic productivity numbers. Competitiveness has also deteriorated since this Chancellor took office. According to the International Institute for Management Development, this country was ranked 11th on the world competitiveness scoreboard in 1997. By 2001, under this Chancellor, we had fallen to 19th.

According to the global entrepreneurship report of January this year, the UK has a higher proportion than Ireland, the US, Mexico or Australia of entrepreneurs who feel that they are a low priority—or less—for the Government. Of the UK respondents, 75 per cent. said that cutting red tape would radically improve the state of entrepreneurial culture in this country. David Wilkinson, head of entrepreneurial services at Ernst and Young, has said, in relation to the global entrepreneurship report, that

One figure—£15 billion—explains why the widespread dissatisfaction is growing, and why the Bill so utterly misses the point about international competitiveness. That figure represents the cost of the regulation that has been piled on British business since 1997. The British Chambers of Commerce calculated that figure using some very accurate numbers—the Government's own figures for regulatory impact assessments in each Department. Importantly, the figure excludes the financial costs of the national minimum wage: it deals with administrative costs only.

The Institute of Directors has also done some interesting work, as was evident in its survey published in the Financial Times on 25 March. The survey showed that 93 per cent. of the institute's members—not an insubstantial focus group of corporate players and business men—believe that excessive regulation is bad, and that it is getting worse every year.

The new Labour Government have done nothing to limit the colossal recurring financial costs of regulations, which are represented in the cumulative figure of £15 billion since 1997. I shall list the yearly costs of some of the bigger-ticket items. The recurring financial cost to British business of the working time directive comes to £2.3 billion a year. For the data protection directive, the figure is £0.6 billion, and for the pollution directive it is around £1 billion. The recurring costs of payroll burdens—where firms have to do the Government's work—have varied between £125 million and £210 million a year for student loan repayments. There have also been recurring costs of £105 million for the administration of the working families tax credit. However, I fancy that that is an underestimate.

Mr. Nigel Beard (Bexleyheath and Crayford): Will the hon. Gentleman give way?

Mr. Ruffley: I am more than happy to give way to my colleague from the Treasury Select Committee.

Mr. Beard: I thank the hon. Gentleman. Phrases such as "general regulation" and "red tape" cover a multitude

10 Apr 2002 : Column 81

of sins. Which of the items that he has listed would the hon. Gentleman abolish to reduce the so-called burdens that he is illustrating?

Mr. Ruffley: I am using the nomenclature of the British Chambers of Commerce, not my own. That body has added up all the costs set out in each Department's regulatory impact assessment, and come to a total of £15 billion. I think that the working families tax credit—soon to be the working tax credit and family tax credit—is a mess. I do not believe employers and businesses should be required to be outposts of the Department for Work and Pensions.

As for the other directives, some have not been argued against effectively in Brussels, from where many—though not all—emanate. That will be one of the priorities for the next Conservative Government. We will act in the interests of competitiveness, whereas the proposals in the Bill are strictly second, third or fourth order. The first-order question has to do with how we get to grips with the regulatory costs on business. I shall continue the litany of regulatory costs, although I shall not trespass too much on the House's time, as I want to get to the meat of the Bill and to deal with the specific clauses that worry me.

There are in the pipeline EU regulations that will add to regulatory costs, and they include the information and consultation directive. Before the general election, the Government talked tough about opposing that directive, but we do not know what they will do when it reappears before the Council of Ministers. I hope that the Minister will tell us that the Government will oppose it.

What will the Government do with regard to the proposed end of life vehicles directive, or the proposal regarding waste electrical equipment? Will the Government bother with the new framework agreement between social partners on temporary agency workers? Will they oppose those directives, or not? We need to know, as the answer is at the heart of competitiveness, and is much more important than the Bill.

The Bill purports to promote enterprise, but it deals with too many second-order questions. I shall deal with the proposals in the Bill that are defective, but I acknowledge that some are to be welcomed. I welcome the sensible removal of ministerial rulings on proposed mergers, and the fact that the Bill will put the new OFT board on a statutory footing. Clause 8, which gives the OFT a more direct and forceful role in setting guidance standards in various sectors of the economy so that trade associations can put rule books together, is important and will benefit consumers. Finally, criminal sanctions against cartel operators will be a useful deterrent. Although I do not imagine that they will be used very often, the sanctions will concentrate minds. I welcome that, and I believe other Conservative Members do as well.

However, part 10 of the Bill will require a lot of attention in Standing Committee. Reducing the stigma of bankruptcy is important in encouraging entrepreneurship, but the proposals have been put together in a rather misguided way. The Bill seeks to encourage entrepreneurship by reducing the bankruptcy period from three years to one year, or to less than one year, for non-culpable bankrupts—that is, people who are deemed not to have been reckless or dishonest.

Will the Minister tell us if resources will be available so that the existing number of official receivers can investigate every bankruptcy case? In the first instance,

10 Apr 2002 : Column 82

I fancy that they—not the courts—will have to determine whether dishonesty obtains in a particular case. Indeed, given the heavier sanctions that the Bill will introduce for the dishonest or reckless bankrupt—a bankruptcy period of up to 15 years applies—many commentators in the legal profession observe that the judicial review industry may get a shot in the arm. There could be more claims under human rights legislation, which could undermine enforcement of the distinction—assuming that one can make that distinction—between a dishonest or reckless bankrupt on the one hand and a non-culpable bankrupt on the other.

Under the Bill, an individual could be out of bankruptcy in 12 months or even less. Are the Government seriously inviting us to believe that individuals will have an incentive to enter into individual voluntary agreements? Traditionally, such agreements and arrangements mean that bankrupts can repay over a period of time several times more to creditors than would be the case if they went into bankruptcy straight away.

In addition, given the discretion that official receivers will have to reduce bankruptcy periods to less than 12 months—as low as two or three, it would appear—is it not likely that the public will get the impression that a rogues charter is being created? That is particularly worrying as, according to the Government's own figures, more than half of the bankruptcies this year are a result of consumer debt. Surely the proposals in the Bill may result in consumers racking up debt in the knowledge that filing for bankruptcy could mean that they are free in less than 12 months, provided that they have not been dishonest. Frankly, in those circumstances too little stigma leads to too much moral hazard. I cannot understand why the Government are proposing such slack and non-minimal periods for bankruptcy. Twelve months or less simply will not do, as the Opposition Front-Bench spokesman has already said.

Equally, there seems to be a lack of clear thought and precision in the clauses that deal with corporate insolvency in part 10 of the Bill. Apparently, Ministers believe that administrative receivership is a very bad thing. The clichéd view, which the Minister probably shares, is that such receiverships are normally brought about by banks, which usually hold the debentures and floating charges. They pull the plug early when times are not so good and send businesses and their work forces into oblivion. Clearly, that is a bad thing.

The problem with that caricature is that receivership is not always like that. In many cases it involves a hive-down or a transfer of assets to a new company or management. That scenario is not captured by the business failure numbers.

Administration, which is what the Bill is pressing very aggressively and which will lead to the virtual demise of administrative receivership, is essentially a court procedure. While the Government ask us to believe that that procedure will not be as onerous as administrations at present, that the time and expense will not be as great and that there will be a fast-track procedure, I do not know any practitioner in the field who honestly believes that. Some businesses that do not have the opportunity to grant a floating charge or a debenture, and whose bankers do not have that facility, will have to go the administration route. They may face higher charges and more requests for personal security and guarantees. That is not what the Government want to achieve—a restriction in the ease of

10 Apr 2002 : Column 83

accessing finance—but it could be a direct consequence of administrative receivership being kicked into touch by those clauses.

Is the Minister aware that there are four times as many cases of administrative receivership as of administrations? Logically, if all those administrative receiverships become administrations, the court system will be severely burdened. There may be a capacity problem. This is not a party political point; it is a question of strategic planning. Has the Minister any idea of the amount of pressure on the court system if administrations become the norm as envisaged in the Bill?

If there are blockages in the court system, creditors will take a particularly dim view of administration. They could ask for more onerous levels of security to counter the risk and uncertainty of a court procedure that might be overloaded or sclerotic and might damage their interests.

Having talked to people in legal and corporate insolvency in the square mile, I have gained the impression that the Government have not thought the proposals on corporate insolvency out. They will have to do a great deal more work to get their act together. I trust that they will spend adequate time in Committee to ensure that that is done.

The more I look at the Bill and its omissions, the more I realise that the Government do not understand what competitiveness and enterprise are about. The Bill completely misses the point—it misses it cubed. The Government and the Labour party do not grasp that more regulation, interference and complexity damage economies rather than strengthen them. The Chancellor, who is the true architect of the Bill, has got to understand sooner rather than later that the business of Government is not, and never can be, the government of business.

Next Section

IndexHome Page