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Mr. Clapham: If the hon. Gentleman reflects on that point, he will find that we in the UK were still living on capital from the earlier part of the century. He makes a comparison with Japan and Germany, but they had embarked on an all-new investment programme and were working with new capital. That is why productivity was that much higher in those countries.

Gregory Barker: I accept that that made a contribution to the uncompetitive position of British industry, but, fundamentally, it was the uncompetitive nature of our work practices and our work forces, not just the capital employed, that really burdened our industry and our competitive position in the world, as I shall explain.

The price of low unemployment in those halcyon years stored up dragon's teeth for decades ahead, and the over-regulation and Government imposed rigidities of the managed economy in post-war Britain ended in the financial crisis and economic collapse of the 1970s, with a Labour Government forced to impose swingeing cuts on public services. That ultimately led to the humiliation of a Labour Chancellor going cap in hand to the International Monetary Fund, and Britain

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descended into the squalor of the winter of discontent. That is the history of Britain hobbling its economy with restrictive practices.

Mr. Connarty: Except that, as I learned when I studied economics, the £3 billion cuts were not necessary. Again, the Treasury officials could not come up with a proper balance of what the Budget could afford. The crawling to the IMF at that time was unnecessary, as has since been proven.

Gregory Barker: If the cuts were unnecessary, it is a great shame that the hon. Gentleman was not in government at the time; we had an incompetent Labour Government then.

It is easy to pile burdens on to business in the good times with seemingly little effect, but the true effect of regulations and rigidities hits home only when the chill wind of economic downturn starts to blow, as it inevitably does under all Governments. A country's competitive position in the world is truly tested when the order book starts to thin, or margins start to narrow.

A further example of that might be the way in which the Government thought that they could get away with taking a huge amount out of the pensions industry when they came to power in 1997 at a time of rising markets. They could seemingly take that money without much effect, but after the downturn in the stock market, that compounded the crisis in the pensions industry, and we are still reeling from the effect of that today. Exactly the same thing could happen to British industry, which is why a climate of regulation, fixed costs and restrictive practices can make the difference between a company being able to ride out a downturn and being forced to make swingeing job cuts. Such measures can represent the last straw that sends an enterprise to the wall.

That is not a textbook theory—it is the real experience of the rest of Europe. According to the House of Commons Library, the Organisation for Economic Co-operation and Development reports that unemployment in the UK was 5 per cent. in 2003. That compares with a figure of 8.8 per cent. in the eurozone, which is expected to rise to 9 per cent. in 2004. Many of the practices in the Bill that are so lauded by the Government already exist in that zone.

Jim Sheridan: Earlier in the debate, the hon. Gentleman was proud to comment on the measures introduced by previous Conservative Governments to get rid of bad working practices. Does he accept that there are some disciplines with bad working practices and closed shops—especially as regards the Law Society?

Gregory Barker: I am afraid that I do not understand the law or its practices, and to refer to them would stray well outside the terms of the debate.

Mr. Greg Knight (East Yorkshire) (Con) rose—

Hon. Members: He is a lawyer.

Mr. Knight: I am indeed a lawyer—and I would be quite happy for the legal profession to be included in the

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scope of the Bill. If we started to see every Tom, Dick and Harry appearing as a legal representative in court, people would truly value their lawyers.

Gregory Barker: I am grateful to my right hon. Friend for that intervention.

For the sound reasons that I outlined, and especially given the experience of our competitors in the eurozone, I echo the sentiments of several of my hon. Friends by expressing worries that the Bill will put further burdens on British business. The CBI's submission on the latest pre-Budget report provisionally estimates that if one adds the cost of Labour's business tax increases to the cost of new regulations, the total cost to business is about £15 billion a year. The Bill can be seen only as an unwanted addition to the burden on businesses throughout Britain, which are already suffering from the cumulative burden of the taxation and regulations imposed by the Government.

Mr. Knight: I share my hon. Friend's view that the Bill is basically bad, but does he agree that it is not entirely without merit? For example, Conservative Members welcome clauses 27 and 28, which will extend and clarify the rights of an employee to have a companion at a disciplinary hearing, because we believe in justice. Does he accept that a superb worker, who is unsurpassed at the lathe, could be inarticulate when faced with a hearing?

Gregory Barker: My right hon. Friend makes a good point. I do not condemn everything in the Bill, but I only have time to address certain points, and I will confine my remarks to those.

I agree, of course, that there are good parts in the Bill, but its regulatory nature gives me the greatest concern, and is the focus of my comments.

In employment legislation, what is important to business is the quantity and frequency of change. I am struck by the fact that the Bill represents what is worst about the whole consultancy culture brought about by the Government's attitude to business, although that is perhaps not a surprise, given the Secretary of State's employment history. However, I am afraid that she brings to this role the enthusiasm for management change and for change strategy that is typical of so many consultants in that burgeoning service industry. What real industry, particularly small firms, seek from the Government is not constant change but stability and security so that they can plan for the future with some certainty, and that is all too absent from the Government's programme.

The cumulative effect of those constant changes and additions to the regulatory burden poses problems, and the volume of red tape imposed by the Government can be overwhelming for businesses. The Bill contains a number of measures that will add to the burdens on business, and it has been suggested that they may increase during the Bill's passage through Parliament as further concessions are made to the Labour party's union allies. It is cause for concern that this may, quietly, be payback time for the brothers. [Hon. Members: "And sisters."] Indeed.

The first three parts of the Bill concentrate on labour law and trade union rights. In July 2002 the Government announced a review of the Employment

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Relations Act 1999, the centrepiece of which was the establishment of a statutory procedure for the recognition of trade unions by employers for collective bargaining rights. The Bill implements the findings of that review. The CBI has welcomed the Government's approach because it does not seek to overhaul the key principles of the 1999 Act. I share that welcome, although it comes as little surprise to me that many of the CBI's key points relate to what is left out of the Bill rather than what it contains.

The Bill is, I am afraid, just another example of the Government's tendency to regulate first and think later. I am of course pleased that, in this instance, legislation is rather less substantial than it could have been, but I have grave concerns about over-regulation, particularly when that is placed in the context of the ever-increasing burden of regulation.

I am particularly pleased to note that the small firms exemption is to be kept. That is a key part of the Bill, and I am keen to see it replicated in other areas of regulation. Small firms are the bedrock of our economy. They are the seedbed of innovation, stimulating competition, and many are the large firms of tomorrow. Small enterprises and entrepreneurs are the key drivers of job creation in the 21st century. They mop up jobs lost in large companies and create new jobs at an ever-increasing rate. Research by the Federation of Small Businesses shows that between 1995 and 1999 the net number of jobs created by small firms was 545,000, compared with just 218,000 by larger companies.

My concern is that small firms feel the burden of regulation far more acutely than larger firms. The FSB said that

I fear that that is right, and I am pleased that my party is looking at ways to reduce the burden of regulation on small businesses as part of our commitment to reducing that burden for all UK businesses.

I shall focus my remaining comments on clause 31, which gives the Secretary of State the power to make regulations implementing the EU directive on information and consultation. The directive establishes a framework for informing and consulting employees in the European Community. The sentiments behind the measure are not contentious. Many measures, including this one, sound eminently laudable; indeed, I am absolutely certain that informing and consulting employees and generally involving them in the running of a firm is good for both employers and employees. There are undoubtedly benefits of trust, respect and partnership to be gained.

Most successful businesses do that well, not because it is an obligation but because they recognise that empowering their employees gives them a competitive advantage. Businesses must learn that for themselves, not have it imposed upon them, with the associated compliance and auditing costs.

It is beyond doubt that good companies already operate in such a manner as to have necessary lines of communication in place, and best practice and competitive advantage will be the greatest spur to

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improve upon that. As I said, there are likely to be productivity gains from doing so, so it is ludicrous to assume that a company acting in the best interests of its shareholders, let alone its wider stakeholders and employees, will not implement measures when it realises that there are productivity gains to be had.

That is borne out by the facts. A study conducted by the Institute of Directors in 1998 showed that 85 per cent. of directors had communications arrangements with their staff in place. Undoubtedly, those can and must be improved, but I would rather leave that to business to work out than leave it to civil servants or politicians in the DTI. To enshrine it in law as a duty to carry out a standard way of operating that will be of practical benefit to the companies involved will be a burden, not a competitive advantage. The Government's proposals as outlined in their consultation on the issue impose a uniform EU-drafted directive on British companies—yet another directive that is not necessarily the best way of achieving the desired outcome.

All companies are different, so the way in which they inform and consult their staff must fit in with the way in which the company is run and be compatible with its operating culture. That is dependent on many factors, such as management structure, employee history and existing practice. It is vital that the regulations are implemented with a degree of flexibility that allows firms to take account of their individual peculiarities and advantages.

Productivity growth has halved under Labour as firms feel the heat of the regulatory burden. The Bill will only add to the burden—

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