Government's Assessment as set out in the Pre-budget Report 2001 for the Purposes of Section 5 of the European Communities (Amendment) Act 1993

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Mr. Mark Francois (Rayleigh): I apologise for interrupting the flow of my hon. Friend's speech, which I was rather enjoying. I recently received a letter from a constituent who runs a palleting business for packaging and the transport of goods. He has had to start laying off people because of the excessive regulatory cost that is constantly being piled upon him as a business man with a profit-and-loss responsibility. The most telling sentence in his letter made an impression on me. It stated:

    ''We are becoming an unpaid branch of the civil service.''

When will the Government realise that every time they come up with a new wheeze, they threaten people's jobs?

Mr. Bercow: My hon. Friend is right. He makes his point with characteristic eloquence.

The problem is that the Government do not see the effect of the measures that they impose. I am prepared to be charitable; I have become progressively more charitable in this place in the past four and a half years. Let us try to accept that each of us has good motives in these matters; I am the first to concede that to the great majority of members of the Government and of the Labour party, the measures that impose administrative and regulatory burdens on companies are well intentioned. The working time directive, the national minimum wage, the working families tax credit, the parental leave directive, the student loan repayment administration regulations, the employment credit, the disabled persons learning credit and so on, whatever their intrinsic merits or demerits, have one thing in common: as my hon. Friend wisely perceives, all effectively shuffle responsibility from central Government to beleaguered businesses, forcing the latter to become unpaid tax collectors and benefit distributors. That, in a nutshell, is the problem.

I welcome the fact that the Chancellor gave an earnest of his intentions in the pre-Budget report to reduce payroll burdens on business, but he should not be smug about it. Still less can he afford to be content with exiguous achievements. He is the self-same Chancellor who has been busily piling on burdens inexorably for the past four and a half years. If the right hon. Gentleman is saying, although not in so many words, ''I got it wrong, I recognise the error of my ways, I am resolved to do better,'' we welcome the apostolic conversion, but it would be helpful if he would acknowledge his responsibility for the burdens that have been imposed since he took office. They are not anyone else's fault, but they have imposed additional costs and done damage.

There are other problems, too.

Mr. Adrian Flook (Taunton): Does my hon. Friend think that the Government will ever stop the inexorable layering on of regulations? Is there any light at the end of the tunnel that is not an oncoming train?

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Mr. Bercow: I would like to think so. I am not a natural optimist; I do not know my hon. Friend's mindset in these matters but it would be good to think that the Government will turn over a new leaf, to decide to become a deregulatory or light-touch regulatory Administration. I am sorry to say, especially to my hon. Friend, to whom it is a matter of special concern, that the words pigs before eyes readily spring to mind. It seems unlikely that the Government will fundamentally change course. It will continually be necessary, not only for the Opposition but also for the authentic representatives of business, to remind Ministers of the dangers of the regulatory approach.

I plead with the Minister for some intellectual honesty and political consistency. Ministers are fond of invoking business organisations in their support when it suits them to do so. For example, from time to time they will refer to certain figures in business who are in favour of British entry to the euro; they will cite the Confederation of British Industry or another business organisation in support of a policy that they have introduced, but there is a common thread in the attitude of business organisations to regulation. The Institute of Directors, the CBI, the Federation of Small Businesses, the Forum of Private Business, the British Retail Consortium and the British chambers of commerce all say that this is an over-regulatory Government who impose too many burdens, cost companies too much money and make it more difficult to employ people.

I was intrigued when the Minister explained to me, in a slightly circumlocutory way, the nature and extent of the British influence on the EU that would follow from the submission of the report under the terms of section 5 of the European Communities (Amendment) Act 1993. It did not seem clear to me that there was any influence, and it was regrettable in her otherwise admirable and stimulating speech, that she did not say anything about the recent survey of 4,000 firms across the EU that found that Britain was now the most difficult country with which and in which to do business. That must have something to do with the Government's policies.

The trouble with the Chancellor of the Exchequer, despite his many gifts, is that he wants to have power over everything but to take responsibility for nothing. He is what might be described as a departmental imperialist. It is not just a matter of having tanks on the lawn; he has invaded wholesale virtually every domestic Department. The other day, an unnamed Minister was reported as saying that the Chancellor does not consult; he writes to his Cabinet colleagues terse letters of instruction. He refers to the Secretary of State for Health, a senior member of the Cabinet, by his surname, as though he is a truculent little boy who has to be put in his place. It is hardly any wonder that the Chancellor does not have many friends in the Cabinet. He wants to control everything, but when things go wrong—as a number of things are now doing—he does not seem to want to accept responsibility.

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Ms Gisela Stuart (Birmingham, Edgbaston): I want to bring the hon. Gentleman back to what he said about the regulatory framework. Do I take it that he wants the Government to become more European? Most of the European countries are adopting an approach of rewarding compliance rather than punishing non-compliance.

Mr. Bercow: I am not arguing that we should become more European, which is far too vague a term to admit of a simple yes-no answer. The hon. Lady would not try to trap me, as it is not in her nature to make such an attempt, but there are grave dangers for a politician in signing up to a vague—it might almost be described as vacuous—formula or description. However, it is a commonplace that we tend to adhere not just to the spirit but to the letter of every directive, regulation or EU decision in a way that is not ordinarily the case in other member states. If there were a common level of compliance, this country would not suffer its present competitive disadvantage. It is well understood that, in addition to the burdensome impact of European directives and regulations in their initial form, there is a compounded disadvantage for this country that flows from the fact that British civil servants tend to gold plate them. If the Minister is asking me whether I would prefer British civil servants not to gold plate those directives and regulations, the answer is yes. If she is asking me whether that requires robust, strong-minded and competent Ministers to stand up to officials and ensure that Britain bats for itself, the answer is also yes. Do I see many signs of such a development? No, I do not.

There are other problems on the horizon of which you, Mr. Cran, as a distinguished student of economic affairs, will be aware, such as the balance of payments deficit, five successive years of which are without precedent since 1870. The second quarter deficit on goods of more than £9 billion is a cause of particular concern, although, curiously, it did not warrant a mention in the Minister's speech this morning. The projected expansion of the balance of payments deficit, not merely in money terms but as a proportion of gross domestic product, from 1.5 per cent. this year to 2.75 per cent. in 2004 should give us cause to consider whether there are errors of policy that need to be corrected. It would be unwise to assume that that deficit is permanently capable of being funded. Until now, it has been, but that might not continue indefinitely.

We still await clarification from the Government on the way in which they intend to fund their expenditure plans. We have been told specifically by the Chancellor of the Exchequer that he proposes to continue to increase public expenditure by approximately 3.7 per cent. a year based on the premise of growth at between only 2.25 and 2.5 per cent. In the view of the Institute for Fiscal Studies, that will necessitate further increases in taxation. In fairness to the Minister, it has become clear in recent days that the Government are planning to jack up taxes. That has not been stated explicitly, but the mood music tells us much and it seems apparent that Ministers are preparing the ground for a big increase in the burdens on the British

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people. I do not know whether that will take the form of increases in national insurance contributions, but I wish to make the obvious, but salient, point that the majority of people who will be affected by increases in taxation are those who earn but a fraction of the salaries of Cabinet Ministers.

It is all very well for Ministers to behave as though people are relaxed about taxes and do not mind paying more in taxation, but Ministers earn a great deal and probably do not spend very much. They travel in cars provided by the Government. They are given lunches by journalists. They fly all over the world in hot pursuit of their globetrotting agenda to be subsidised by the taxpayer. Ministers are busy people. They are important, influential and assiduous. They have many commitments and full diaries, so I do not know how they find time to spend any money at all. However, others of us who incur burdens, more particularly our constituents who often earn a great deal less than us, are not relaxed about the idea of higher taxes.

No Chancellor would be so foolish as to say, ''I will never increase any taxes.'' I would think less of the Chancellor if he did so. However, people are bothered by the idea that higher taxation will be demanded from them when historical precedent offers no encouragement for the view that they will get better services as a result. It is the combination of the Government taxing more and delivering less that so aggrieves people. As my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), the shadow Chancellor, said on 27 November in his response to the pre-Budget statement, every year the Labour Government make promises about the public services, and every year they break them.

That is true of health, on which an almighty spat is taking place between the Prime Minister and the Chancellor. We know that the Chancellor has dug his heels in and is insistent on increasing provision for the national health service, exclusively through funds raised from income taxation. We know that he has problems on the horizon, however, because the Prime Minister is against him on the matter, as is his old enemy, the right hon. Member for Norwich, South (Mr. Clarke), the chairman of the Labour party. He has also faced opposition from his former Cabinet colleague, the right hon. Member for Hartlepool. Clearly, the Chancellor cannot look for assistance to the Leader of the House of Commons, because it is well known that they have barely been able to stand the sight of each other for the past 20 years. Considerable difficulty is therefore brewing—

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Prepared 10 December 2001