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Mr. Hugo Swire (East Devon): I am very interested in my hon. Friend's remarks. Is he not saying that larger businesses can, on the whole, offload and absorb some of those costs, but smaller businesses have only a small number of options—first, to make people redundant, secondly, to go bankrupt and, thirdly, to pass on the increased costs to the consumer?
Mr. Norman: That reinforces my point; my hon. Friend puts it succinctly.
Regulation not only affects economies of scale but slows the pace of innovation. It means that it is much harder to introduce new products in line with other countries and that it is much harder to produce technical innovation. We have such a backlog—an archaeology—of legislation on the statute book that a lot of it is of absolutely no relevance today, but rather slows the pace of change. For example, the prescribed quantities legislation that was introduced in the 1920s still limits the size and weight of goods that can be sold. Products such as flaked cereals, ground coffee, and even bottles of wine can be sold only in certain sizes. One is not allowed to sell loaves of bread other than in weights of 600 g and 1,200 g, so it is illegal to sell a 900 g loaf of bread. I know that because at Asda we once wanted to sell 900 g loaves, so we had the great idea of selling 600 g with 300 g free. Then, of course, the trading standards officers prosecuted us. I make the point in a humorous vein, but it illustrates the fact that such regulation slows the pace of innovation and change and erodes the entrepreneurial culture, and it all has a ratchet effect. Our problem is that we lay legislation on legislation, and it all goes back a very long way—so far back that, for instance, all small shopkeepers who want to sell a pheasant have to have a game licence. That presumably relates back to something to do with poaching in the last century or the century before that, but it is completely irrelevant today and it should go. The trouble is that it is on nobody's priority list to make it go.
It is a question not only of the legislation on the statute book but of enforcement. In this country we are world-beaters when it comes to enforcement. We employ armies of enforcers who are expert in making sure that little businesses either go out of business or adding to their costs. As a result, we have very high standards. Although that is entirely desirable, we often enforce the means, not the ends. I can go into any supermarket or food shop in Holland or France and within five minutes find things that would be illegal in
this country. That is not because they are selling unsafe food, but because of the way in which we enforce our regulations.The situation is getting a lot worse; it has accelerated over the past five years. Even now, legislation is reaching the statute book that will be very damaging in accumulation. We need an approach to regulation that is systemically different—not just picking away, but a profoundly new approach. As the hon. Member for Weston-super-Mare (Brian Cotter) said, it must be based on proper regulatory impact assessments. In some cases, regulatory impact assessments are a complete disgrace; they must be externally audited so that we know that they are objective. We also need sunset clauses; a limit on the cost of form-filling and bureaucracy that the Government are entitled to impose on business without compensation; the ability to appeal against excessive and life-threatening enforcement; removal of the archaeology in the shape of a mechanism for sweeping away the outdated legislation that is no longer relevant; and proper scrutiny of European legislation—not just the legislation itself, but the way in which it will be enforced in this country.
I make these points not in a partisan way but because I feel that the Secretary of State's speech missed the point. We have a growing problem in this country: a decline in the competitiveness of small businesses and the rate of innovation. That must be tackled in a profound way to provide systemic solutions to a chronic problem.
6.18 pm
Dr. Ian Gibson (Norwich, North): I have a different tale to tell. As I wing my way through East Anglia and, indeed, the rest of the country and other parts of the world, visiting not only science-based small businesses but other small businesses, I can sense that the entrepreneurial spirit is alive. It is a time for small business to get excited and to expand. It is recognised that by the end of this decade some 2 million jobs will be created in the sector in areas such as biofuels, which are prominent and growing in small businesses in East Anglia, biotechnologies and nanotechnologies. Carbon and energy production will be another growing area. Through business links, the Government have interacted with about half a million small businesses—twice as many as two years ago. Seven policy strategies, which I have no time to describe, have been published and are being enacted.
Innovation is the key for science-based small businesses. We should concentrate on helping them not just to start and survive, but to innovate and grow. In a recent report on energy and an earlier one on engineering and physical sciences, the Select Committee on Science and Technology examined emerging engineering and physical science research by universities involving industry and its interaction with universities. Development of such knowledge to create a well-designed product that meets a market need gives rise to problems. Bringing about a conjunction of technology with market assessment is almost exclusively the job of industry, and is far more expensive and risky than research. All the evidence suggests that that part of the innovation process is seriously underfunded, and is not provided adequately in engineering and physical
science-based companies. Market research and the provision of demonstrators of the final product are recognised as being critical to innovative success. Support for small businesses in particular is vital at that crucial stage.Let me say something about spin-out companies, which can be seen in clusters. In research parks all over the country, innovative and entrepreneurial skills are developing. A new spirit is alive in the land. A higher education-business interaction survey showed a 22 per cent. increase on the previous year in the creation of spin-outs, with 248 graduate start-up companies and 69 staff start-ups. The number of staff in the higher education institutions' commercialisation offices had increased to 1,500 from a very low base. We may still be a bit behind the United States in terms of product development, but the Department of Trade and Industry's chief economic adviser on science tells me that in the past year there have been more spin-out companies.
Some problems are ascribed to red tape, but not the red tape that Conservative Members have described. It is when universities become active in the field of innovation that things begin to happen. The number of bright young people who are trained to use their brains for marketing purposes and to interact with industry, and who are excited by the prospect, is growing almost daily. In Leeds as elsewhere, new companies are beginning to spark and to develop. The White Paper deals with that.
Mr. O'Neill : I raised this point earlier, but my hon. Friend is going into more detail. British universities are variable in terms of knowledge transfer. This may seem slightly regulatory, but might it not be valuable to apply it more consistently, and to allow more liaison between individuals who are responsible for it? Alternatively, universities could be grouped, geographically or according to discipline, so that they could work to common standards to achieve a critical mass that would facilitate knowledge transfer.
Dr. Gibson: I entirely agree—regional interaction between universities through regional development agencies is a whole new unexplored territory.
Mr. Kerry Pollard (St. Albans): A recent survey by the Royal Bank of Scotland suggested that the eastern region, which my hon. Friend and I both represent, was the only region that was growing rapidly. Is that not due to the entrepreneurial and innovative spirit in our small business sector?
Dr. Gibson: Indeed. In our region, it is not all about Cambridge university; it is about Cranfield—
Dr. Gibson: Yes, and all the other new universities that are coming onstream and interacting. The higher education White Paper is not just about tuition fees and top-up fees; it is about the interaction between academia and industry. Richard Lambert, ex-editor of the
Financial Times, is charged with feeding that White Paper with information from the study that he is carrying out. The work that he has released so far suggests that the position is not as bad as we think. We tend to think that academics are closeted in their ivory towers, but he says that there are signs of that interaction beginning to emerge. There is much more to do, but we can see the signs of that happening. The report will be extremely important.Universities that have high research ratings seem to have the largest number of spin-out companies, so there is a correlation between research, function and good teaching, producing bright young brains to engage not just in further academic research but in the industrial exploitation of those ideas. We must welcome that.
To me, chemistry has always been the most boring subject in the world—dull people, always drunk on Friday and Saturday nights. The students never did much, but the Royal Society of Chemistry has published a report. Three groups were asked to complete a spin-out questionnaire: university technology transfer officers, heads of chemistry departments, and individuals involved in spin-outs. Twenty-nine UK chemistry departments have been involved in 65 spin-out companies in the past few years. What does the Royal Society say are the inhibitory factors? It is not red tape.
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