Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 280-291)



  280. That was going to be my next question in terms of the fact that you mentioned the Working Time Directive. If you are going to pass that information on to us I think that would be quite useful. I did highlight one little anomaly in relation to your evidence on EU based directives and the impact on manufacturing. That was summed up in relation to your comments on productivity and the impact of high technology capital equipment where you put a paragraph which says, "Ironically, it may be that in Europe they are forced to invest in high technology and automation as a way to cope with reduced working and high social costs." It does seem to conflict somewhat with the points you made about the regulatory burden. Could that be put down again to differences in culture and in approach where certain countries in mainland Europe, faced with European directives, have taken a completely different line and because of their different culture invested and got around things in a different way?
  (Mr Legg) Yes. As Peter has mentioned, there is a fairly clear line of those more southerly nations in the EU who tend not to apply these regulations so clearly and those that do. Germany is one country where the working regulations are applied and were applied even before there was a European regulation. In fact, they were the instigators, one could cynically say, because they were suffering and perhaps they thought they could make the rest of us suffer as well. I think there was an element of that. We were particularly referring there to investment in Germany and investment in Scandinavia where they do suffer more from shorter working hours imposed by stronger unions, in the case of Germany, and in Scandinavia it is more because of their appetite for leisure time. They just do not want to work long hours. They have a different attitude and culture altogether. Really that statement referred to the specific area of the EU rather than a generalisation.

  281. But nevertheless a different approach to cater for certain problems that exist within the EU?
  (Mr Legg) Yes.

Mr Lansley

  282. In the BPF evidence you express the view that the Deregulation Task Force has been a failure. You are not equivocating on that subject so if it was a failure what would you do instead and how would you judge it to be a success?
  (Mr Davis) The Better Regulation Task Force we do not see any demonstrable results from its work over quite a few years. I am sure you are probably going to take evidence from them as well. What we would like to see is a Cabinet Minister-led grouping with small and large businessmen joining that Cabinet Minister and sitting on a board to review retrospectively legislation which is complex and which causes industry a lot of difficulties which could be simplified, but also to examine new legislation like the kind I have mentioned previously which is on the horizon and to examine that and ensure that there is a minimum burden on industry, but of course ensuring that the provisions of the legislation are achieved and ensuring that there is a minimum burden on industry. We also put in our submission that we feel there should be an annual target set. This is difficult to quantify perhaps and that is up to Government to decide how that is quantified, but there should be a quantifiable annual target for such a grouping as well. Patricia Hewitt has of course announced that there will be a small business regulation drive. I do not think there are any details as far as I am aware as yet on this. This is going to be incorporated in the DTI review. From what we know about this we just do not think it goes far enough. We think there needs to be a more fundamental root and branch examination of up and coming legislation and also existing legislation.

  283. That does sound suspiciously like a description of what the Better Regulation Task Force (or perhaps more particularly when it was the Deregulation Task Force) thought it was doing, but in practice it came up with a range of measures which industry regarded as being rather at the margin of regulatory impact overall. In practice most of the large changes in regulation over recent years have been in substantial employment measures. Are you looking for any specific reduction in regulation?
  (Mr Davis) We are certainly looking for a reduction in regulation. The problem with the task force is that it has not had the teeth to drive things through. I have had some conversations with Lord Haskins on this subject which I will not divulge but I think there have been problems for the task force, to be frank about it, and they may wish to tell you about that themselves. That is not for me to mention to you. There is a need for a drive. There is plenty of evidence of what it should look at and we would certainly be willing to furnish examples of what it should look at, but we need to have the confidence that this is a substantive drive by Government.

  284. Have you had a chance to look at the Regulatory Action Plan published two or three weeks ago?
  (Mr Davis) No, I have not seen that.

  285. Would you perhaps have a chance to look at that and tell us what you think about it? There are a large number of measures, only a limited number of which are in the DTI field so it might be useful to focus on those and see whether even the cumulative effect of those proposals on DTI would have any significant benefit to industry or whether it is another case of piling up a very large number of small changes and hope that people will think it amounts to something.
  (Mr Davis) We will certainly look at that, Chairman. It is of course not just the DTI. This spans across other Government departments as well and all other government departments have regulations impacting on the industry, so it is more than just the DTI.[6]

  286. DEFRA in that context has rather more to offer than the DTI so it might be right to include that as well.
  (Mr Legg) Can I just mention on that subject that the burden of regulation falls particularly heavily on SMEs and if you can imagine the management in a company of, say 30, 40, 50 or even 100 people, it is enormously problematic to keep up to date with all the level of regulations that are coming forward. The mountain of paperwork that hits people's desks is phenomenal. At the same time in some cases they are trying to formulate strategies either to expand or even just to survive. I give you one example, and I am not fully familiar with this, but my understanding is that there are regulations coming in whereby we have to have consultation with employees possibly through workers' councils for companies that are under 50 people. I am not sure about the size of the company and maybe we can check that. Generally in small companies there is a good relationship between management and workforce and these sorts of things go on in an ad hoc way rather than having to have the formal structure and go through that routine. That is the sort of burden that small companies find a problem.

Mr Djanogly

  287. Do you think that the applicability of regulations should be varied according to the size of the company?
  (Mr Legg) Certainly. For under 100 people I think the burden of regulation is very heavy indeed.
  (Mr Davis) Our good allies the Chemical Industries Association, who tend to be in larger companies, in their submission noted a figure which certainly sounds comparable to what I have heard in our industry, that in their size of companies the senior management regulation in all its aspects takes up about 12 per cent of senior management time. Mike I am sure would agree that in smaller companies it is a lot more than that.


  288. Just before we finish we would like to get your views on one area. It is the other side of th coin from regulation. When the Government is trying to help you—and we all know the joke about that one—we have the Regional Development Agency, Small Business Service, Manufacturing Advisory Service, etc, etc. Other witnesses have argued that perhaps this could be better integrated. What is your general view? I am not asking for a thesis on this. What is your general view on Business Support Services? You represent a plethora of organisations across th the country, different types of regional development agencies and the like. What is your view of the weft and warp of this patchwork that we have?
  (Mr Legg) It is a big subject, Chairman. I think it is an enormous problem, the whole variety of Government support and aid that is available to companies in particular, similar to what I have said just now. There is a huge amount of paperwork that comes through, for instance, from the DTI with all sorts of initiatives which are well-meaning, well-founded, which the majority of managers would say, "If only. I would like to but I cannot because I have not got the time" and all the rest of it. I do think the whole thing needs to be culled, made a lot simpler and a lot more direct. It is difficult to draw examples straightaway, but maybe Peter has something to add.
  (Mr Davis) I do agree very much with what Mike has said, which is why the DTI review is very welcome in specifically looking at the support given to industry and trying to make sense of it all. An illustration of this is that we asked some months ago, because of an increasing number of inquiries from member companies and non-member companies about where different types of support could be found from funds, either from Britain or from European funds, and we asked for their help in constructing a web site because the level of phone calls was becoming rather considerable and we thought a web site with some basic guidance and where to get more information would be rather helpful. They said to us, "Yes, we will certainly help you but it has got to be after we have had a major review. It is such a mess. We need to have this cull as part of the DTI review, sort it all out and then we will come back to you and certainly we will help with the web site so that firms can get basic guidance on where to go, what the schemes cover and so on." I think it is confusing. It is all very well meant but it is confusing. There are a lot of overlapping schemes which we are aware of and the fact that, as I mentioned earlier, with this survey, 71 per cent of plastics firms have never received a government grant or other funding is because they find it a rather impenetrable maze which hopefully will soon be sorted out.

Mr Lansley

  289. But was not the establishment of Business Links was intended to create a one-stop shop and a route of entry into all these sources of advice?
  (Mr Legg) I think they were but they have failed in doing that. A lot of the DTI schemes, as was said before, are very well intentioned with good ideas and they work very well for the larger companies, but I think when it comes back to the smaller companies the initiatives fall on stony ground. If you take, for example, the bench marking initiative, I think it is absolutely excellent but the take-up of it was relatively small. It has been badly marketed perhaps amongst SMEs. There are a lot of other initiatives. People I talk to on a day to day basis just do not know where or what is available.

  290. Talking of initiatives, presumably you went to the manufacturing summit in December?
  (Mr Legg) Unfortunately we were not invited. We could comment though.

  Mr Lansley: Is that one of the reasons why it did not appear in your memorandum?


  291. You have been invited here to a hearing and we are very grateful for the information you have given. You have undertaken, Mr Davis, to furnish us with some more information. One thing that we are concerned about is inward investment. Perhaps you could give us a note on that as well with some specifics. We are a bit thin on the evidence there but if you could give us some additional information on that it would be extremely helpful. Thank you very much for your time, gentlemen. It has taken rather longer than we had intended but it was extremely useful.

  (Mr Legg) Thank you very much indeed for the opportunity.

6   Note by witness: As requested we have looked at the recently published Regulatory Action Plan and in so doing have established from our members that they are unaware of its existence. Initially we examined the 25 regulations that were within the DTI field, and would comment that the cumulative effect of approximately 50% would be of benefit to SMEs. However the document also highlighted the fact that some 60 of the 167 regulations in section one dealing with business, charities and the voluntary sector could affect business and that the additional 35 regulations were in the field of Departments such as DEFRA, DfES, DTLR, HM C&E and HSE. We have noted the appointment at the end of the month of Mr D Arculus to replace Lord Haskins as head of the Better Regulation Task Force and hope that he will raise the awareness of what Government is both seeking to do and what is being achieved regarding regulations. Perhaps more importantly we trust he will strive to ensure that the impact of regulations on the competitiveness of manufacturing and SMEs in particular is properly assessed before they are introduced. Back

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