Select Committee on Trade and Industry Minutes of Evidence

Examination of Witness (Questions 340-349)



Mr Djanogly

  340. Many witnesses drew our attention to the question of over-regulation in the United Kingdom and also the zealous manner in which regulations are enforced compared to what they saw happening in other countries. In reading the DTI's memorandum I did not see deregulation mentioned at all. The fact of the matter is a lot of businesses do see this as a very important aspect and I was wondering whether you can comment on why it was not mentioned?
  (Ms Hewitt) I think we provided a fairly comprehensive memorandum, I would be delighted to provide a supplementary one on the whole issue of regulation.

  341. I just mentioned one aspect not included in this?
  (Ms Hewitt) Given the position we hold in inward investment and given the very long problems of under-investment in plant and in skills and given the productivity indicators, it is very clear it is capital investment and skills that are key issues in the productivity gap, we know that the difficulty the manufacturing industry faces across the whole are going to be cured by better regulation. If you look at the OECD benchmark study you will find that we are in a much better position than, indeed, most other industrial economies. Clearly you have heard complaints and, yes, there are legitimate complaints about the gold-plating of some of the regulations but what you also hear predominantly from business people with small companies as well as large who have operated in not only the United Kingdom but in other countries in the European Union is you may complain about red tape in Britain but if you tried it in France, Germany or Belgium it is a very, very different and much more cumbersome environment.

  342. That is not what the European Commission said.
  (Ms Hewitt) The European Commission said that we were doing better than the rest of the European Union. My small business Minister I am afraid to say was rather unhappy with that finding because he wants us to do even better and not get complacent about it. It was a very positive report on how well we have already done. We are really improving our regulatory performance. We have the regulatory before the panel. We have Lord Haskins' replacement coming along. We have William Sargent, the Chairman of the Small Business Council into a special role actually looking at red tape issues right across Government, not simply from the DTI, from the perspective of SMEs. We are getting better. There is still more to do in terms of regulatory impact assessments and we have made very real progress with our European partners in trying to get equal effort on better regulation in Brussels, where a lot of regulation is coming from. The work of the Mandelkern Group on better regulation gives us an excellent base, and I hope at Barcelona we will get a commitment that the Group will deliver an action plan to implement the Mandelkern Group recommendations, and we get that action plan before the summer. We are making changes there. I am always more than happy to look at specific examples. If you have them from businesses who have given evidence here or businesses in your constituency where they can say, if you look at this particular set of regulations or stuff that some agency is doing we will look at that very, very regularly. As Gus Macdonald's Report showed recently we are doing a great deal to try and improve—

  343. Did I hear you right when you started by saying you do not feel that deregulation is relevant to productivity?
  (Ms Hewitt) No, I did not say that. What I did say was that the main determinants of productivity are the ones that we talked about earlier, it is investment in capital equipment and it is skills and it is the management of people and of processes. These are really key things and clearly if you have excessively cumbersome regulation then for individual companies, particularly the smaller ones, that is going to get in the way, it is going to make it harder for them to do all of the other things—

Mr Lansley

  344. Have you asked the businesses what they regard as the principal factors regarding their competitiveness? I am quite certain they would put the burden of regulation amongst the key factors. Do you not agree with them on that?
  (Ms Hewitt) If you ask businesses, as the CBI has, about what has helped them achieve productivity improvements, what it was working in partnership with their employees to deliver improvements in the processes and productivity. That is the key thing. For individual companies the issue may be that they cannot cope with some particular piece of environmental legislation or whatever and we are tackling that.

  345. Is it a factor affecting competitiveness and if it is why did you not draw it to the Committee's attention if you regard it as important? You have clearly not done that?
  (Ms Hewitt) It is clearly important. We gave you a pretty long, possibly over-long—

  346. You gave us a paragraph on management, you did not mention the fact that managers had to contend with the burdens of regulation as one of the factors impacting upon inadequacies for management in many companies.
  (Ms Hewitt) I am very happy to give you a supplementary memorandum. It would be absurd to suggest that our worse productivity performance is primarily or even significantly down to regulatory issues when we have a productivity gap between ourselves, France and Germany where the burden of red tape and regulation is on every objective and subjective measurement much, much higher than it is in the United Kingdom.

  Mr Djanogly: One other point which was picked up by a lot of people who gave evidence in different ways, and has been covered this evening in many ways, it is going back to the concept of having a manufacturing strategy. There is no doubt that many people who gave evidence thought that there is a lack of joined-up thinking, we have seen it in our RDAs to the extent they work with other agencies, schools and universities not understanding the language of business and the other way round, dare I say some people mentioned the competition between the Treasury and the DTI, how they thought that affected things. Could you just leave us with a message as to how you are going to dispel these assertions?


  347. This is a Conservative asking a question about government planning, I think!
  (Ms Hewitt) I was just contemplating the transformation situation from a government that did not care at all about what happened to manufacturing and presided over recessions that devastated our manufacturing sector and did nothing whatsoever to try and improve the conditions for manufacturing, that is one of reasons why we start further behind other countries, it is not the only reason, some of these problems go back 150 years but they certainly were not helped by nearly 20 years of massive Conservative government neglect, if I may say so. On Monday I was at a meeting chaired by the Chancellor with Secretaries of State in all the departments that have direct interest in how we drive up productivity and competitiveness across our economy. As I said earlier the manufacturing sector is a crucial focus of that productivity drive. I think we have not cracked the problem but I think we are much, much better than we were ourselves four years ago, and certainly the previous governments were, at understanding that macroeconomic stability, infrastructure, investment, skills, labour market policy, all of these things that are in a competitive environment, all of them, have a role to play and we join them up, and that is what we do.

Mrs Lawrence

  348. Can I just take you back to regulations for a second. It would seem from what you are saying that the reality is different from the perception of a lot of the people who have given evidence to us on regulation. One area that was raised was the EU Packaging directive and how that was implemented. I am just wondering whether, if that is the case and to change the perception, the DTI is doing any systematic monitoring of the way various European countries implement directives to check that we are not left at a disadvantage? If you are, does that monitoring cover areas that are DTI functions or do you also take on board how environmental legislation is implemented within Europe because of the impact potentially on British businesses?
  (Ms Hewitt) It would be an enormous undertaking to try and monitor the implementation of all of the directives that affect manufacturing across all of the European countries and indeed that is a crucial function for the Commission who are responsible for bringing in proceedings where directives are not properly implemented. What we do get, and I am sure that the Committee has had a look at the evidence with interest, are complaints from individual companies, sometimes sectors, that other countries slip their companies subsidies that are clearly in breach of the rules, they somehow seem to get away with it or they are much lighter in their implementation of directives. What we always say is, give us whatever evidence you can so that we can look at it, either learn from it or ensure that action is taken. I have to say that we do not often get evidence, that is a real problem. Where we do we act upon it. There are specific areas where we look very, very carefully at what is happening across the Union. One example of that is the End of Vehicle Life Directive, where we have said very publicly and repeatedly that we will implement that directive, not only on the same timetable—and there was some confusion round that some months ago—we will implement it in a way that does not put our motor manufacturers at a competitive disadvantage with those in other parts of the European Union. We are watching very closely what other governments are doing in terms of how that is implemented between the initial introduction and the end date of 2007. We will do that on a case-by-case basis. I referred earlier to this issue of gold-plating. I am not sure I have specific examples to give you, I think there have been occasions in the past where we have been so concerned to dot every "I" and cross every "T" and where our legal system is very different from that of the continent. This is not a point about any particular government, where we may have inadvertently put companies at a disadvantage. We are getting much better at looking at the European directives and not trying to do a kind of over-literal interpretation, when actually that is not intention of the directive or the process by which that directive has been achieved.

  Mrs Lawrence: The key is, if there is any evidence it is given to you and you will look at it.


  349. Secretary of State, I am conscious you have had more time with us because we had a break for the vote. There are two things I would like to leave you with, I am not asking for answers now. One, could you give us some indication from your surveying of companies what their concerns have been, let us say since 1997 to date? It is suggested to us that in responses to queries that we make that regulatory impact is of some significance and it was not in your evidence, but we would like to think that your evidence reflects what you have been told. We know there are a number of considerations which are no longer relevant, things like inflation and labour market uncertainty, things of that nature, the ball game has changed. What I would be interested in and the Committee would be interested in is to get some kind of picture of the kind of survey responses that you give. Secondly, this is a question that none of my colleagues have asked, regulatory impact assessment, we know about environmental impact assessment, we know that certain academic bodies like the Bath University Centre for Regulatory Studies have been talking about this. Perhaps you can send us a note on this issue and on whether or not you think that it would be helpful to require those bodies from on-high who bedevil us with regulatory responsibility that they might consider having to justify in impact terms what the new regulations will actually impose upon competitiveness and other aspects in relation to new regulations which come along. That would serve to clarify the debate in a number of ways. Certainly as the Chairman of this Committee it would make my job an awful lot easier because I get fed up listening to the litany from all sides of the Committee, I have to say—if there is such a thing as all sides of a committee which is supposed to be consensual—about matters relating to regulation. It would help my job if nothing else. I know that at all times you are here to help me if nobody else. Thank you very much for your time this evening, we are grateful for the time you have taken and we look forward to seeing the initial replies. Thank you for the courteous way you have given your answers. Thank you.
  (Ms Hewitt) Thank you.

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