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Mr. John Redwood (Wokingham) (Con): I am grateful to my hon. Friend for giving way, and I have declared my interests in the Register.
Is it not the case that 600,000 manufacturing jobs have already been destroyed under this Government, many of them by excessive regulation and taxation? They have been destroyed by the very Government who came to power saying that they were going to be good for manufacturing. Is that not a disgrace?
Mr. O'Brien: I am grateful to my right hon. Friend. No one is more assiduous than he in standing up for the interests of the wealth-creating and risk-taking part of our economy.
I mentioned the example of HSBC. Things have been tough for manufacturing for some time, however, particularly given the globalisation of manufacturing. Many have gone out of business that need not have done. The Government, through their control and command, have placed on those businesses regulations that have been both burdensome and unnecessary, to seek to achieve changes of behaviour that winning businesses would in any event have adopted for themselves. That is not a position that the UK can afford to be in.
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David Frost, the director general of the British Chambers of Commerce, is absolutely correct when he says:
"Business is being held back by administrative costs and burdens. The great strength of the UK economy is its flexibility and if we are to successfully compete globally we must maintain this flexibility."
Precisely for that reason, I have recently written twice to the Secretary of State, asking her to censure, and distance herself from, Labour MEPs who have voted on more than one occasion to scrap the UK opt-out from the 48-hour working week component of the working time directive, worth at least £9 billion a year to employers. Likewise, they have voted in favour of the temporary agency workers directive, which the CBI says would cost up to 160,000 jobs if implemented in the UK.
I regret to say that the Secretary of State has not answered either of my letters—and even worse, she has not bothered to turn up today. Until she is prepared to admit that the behaviour of her MEPs is unacceptable, she and her team will have to accept the charge that she and they are dangerously relaxed about the loss of UK plc's hard-won flexibility, against which she fought tooth and nail in opposition and on which the Liberals would only ever have an opportunity to chunter, as they would not understand the position—[Interruption.]
As we are no doubt about to be reminded—as the Liberals seek to say things from a sedentary position, which is where they are best left—the Government have taken superficial action to reduce the burden of regulation against UK business. On the surface, it is difficult to reconcile the various taskforces and eye-catching initiatives launched since 1997 with the fact that the Financial Times recently carried an editorial in which it asserted that this Government are so ideologically enamoured of regulation that it has become "the new Clause Four". Businesses effectively regard increased regulations as taxes by another name.
This Government's failure to take substantive action to deregulate, and their stubborn commitment to over-regulation, is explained by three factors. First, there is the natural inclination of a Labour Government to big government state interventionism. That has shown no sign of abating under nannying new Labour. According to the House of Commons Library, in the six full calendar years of Labour Government, the number of regulations passed total 23,322. On average, that is 3,887 per annum or 14.95 regulations every working day. That is up 53 per cent. on the number under the last Conservative Government.
Secondly, there is the burgeoning bureaucracy that naturally accompanies a big state. That bureaucracy is now so unaccountable that the Better Regulation Task Force recently admitted that it does not even know how many regulators there are—not "regulations", as it is misprinted in the Order Paper, although it does not know how many of those there are either. That is precisely the problem: it does not know what the cost of regulation is as a proportion of GDP.
Thirdly, on top of those domestic factors, there lies the superstructure of a centralising European Commission, whose legitimacy is not derived from a direct democratic mandate but a technocratic imperative to legislate and to regulate.
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The combination of those three—an interventionist Labour Government, an out-of-control bureaucracy and a power-hungry European Commission—amounts to a hurricane-force storm of over-regulation, which the UK may not have the means to weather in the new, ferociously competitive global economy. That nexus of circumstances has created a serious structural presumption by this Government in favour of regulating in response to any given problem. In a context like that, the Government's initiatives to promote so-called better regulation are tokenistic and ineffectual.
Take regulatory impact assessments, for example. When they sign off an RIA, Ministers are required to assert that the benefits justify the costs. That, however, is a very different proposition from saying that the benefits must outweigh the costs. Justifying regulation is a considerably more subjective and ideological exercise than an objective measurement of estimated financial costs and benefits, which, incidentally, reveals that in 2002–03, the recurrent costs of regulation recorded in RIAs were almost 10 times the recurrent benefits.
Regulatory impact assessments are potentially useful instruments, but they are used neither effectively nor efficiently by this Government. That is demonstrated by a recent parliamentary answer that I received from the Minister for Small Business and Enterprise, who is in his place, on the subject of the costs to business of regulation:
"Information in relation to the estimated benefits and costs to business is provided in the regulatory impact assessment and is best read in the context of each individual RIA."—[Official Report, 22 June 2004; Vol. 422, c. 1319W.]
Reading the estimated impact on business of regulation on a case-by-case basis is the worst strategy that could be adopted. If the problem of over-regulation is ever to be confronted successfully, it will be essential to replace that short-sighted approach to so-called better regulation with the more dynamic approach to deregulation pursued by an incoming future Conservative Government. That would represent a significant culture change, as it would involve assessing regulations by reference to their cumulative impact on business—in other words, in their totality, a favourite Labour word, rather than in isolation, and having regard to the actual drivers of regulation as well as the existing stock of statutory instruments.
I have given my full support to an excellent ten-minute Bill proposed by my hon. Friend the Member for Tunbridge Wells (Mr. Norman), who is present. It would require the independent post-auditing of regulatory impact assessments and their independent assessment in the first place. That would help to ensure that the collective costs of regulatory impact assessments did not outweigh the benefits.
Earlier this year I launched a business deregulation panel to advise me on practicable policy recommendations from a business perspective, on the basis of an analysis of what we have identified as the five principal drivers of over-regulation. They are the EU—of course—gold-plating, Government policy, administrative creep, and compensation culture. That analysis has been published in a pamphlet by the Conservative Research Department policy unit, and is available on www.conservatives.com/policies. I have a copy here.
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The business deregulation panel consists of representatives from the Institute of Directors, the Federation of Small Businesses and the British Chambers of Commerce, as well as the economist Ruth Lea and senior figures from the business world including Martin Barrow, Malcolm McAlpine, Lord MacLaurin and Sir Paul Judge. I shall announce the Opposition's policies on deregulation in more detail following its recommendations, between now and the general election.
Let us look at the Government's record on business deregulation. The so-called flagship initiative overseen by the Cabinet Office is the regulatory reform action plan. It consists of 650 so-called deregulatory measures. I say "so-called" because, for instance, one was the creation of the new super-regulator Ofcom. There is, by the way, no implementation timetable: consequently almost two thirds of the measures remain unimplemented.
In his pre-Budget report statement in December 2003, the Chancellor announced 147 regulations for reform or removal that would be incorporated in the regulatory reform action plan. It subsequently emerged that only 25 per cent. of those 147 deregulatory measures—according to Ernst and Young—related to tax and red-tape issues affecting business. In fact, I recently received a parliamentary answer on the subject from the Financial Secretary, who conceded that
"Among the measures to reform there were several measures with direct benefits for business".—[Official Report, 17 June 2003; Vol. 422, c. 1045W.]
So from 147 business deregulation measures, we are down to "several". In any case, given that the Government introduce an average of 15 regulations every working day, it has taken only about 10 days to replace the repealed regulations, even if they all related to business—which they clearly did not.
Another regulatory reform action plan of which the Chancellor speaks smugly was produced by the European Commission in 2002. The Commission's plans formed the basis of the joint initiative on regulatory reform announced earlier this year by the Chancellor and Finance Ministers of Holland, Luxembourg and Ireland. Here is the problem: at the heart of Government, the Treasury insists
"The scope of this programme includes reform or removal of existing legislation which is in force".—[Official Report, 27 May 2004; Vol. 421, c. 1727W.]
However, the Commission's text is 100 per cent. clear:
"Our aim is not to deregulate or to interfere with the executive's or the legislator's prerogatives, and certainly not to restrict the Community's freedom of action".
Perhaps it was the Chancellor's pique at being thwarted by the Commission that prompted him to tell the European Scrutiny Committee in April:
"it is unacceptable that 50 per cent. or more of regulations come from the European Union".
Let me repeat that, for it is an astonishing admission. The Chancellor of the Exchequer believes it is "unacceptable" that 50 per cent. of regulations come from Europe. Where has he been for the last six years? He is not an innocent victim, but the Chancellor of a Government who, since 1997, have implemented more
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EU directives than had been implemented in the whole of the last quarter of a century. In that case, why on earth does he want to sign up to the new EU constitution, when it has emerged that the Government's own legal advisers admit that it will give European judges powers to erode the flexibility of the UK's labour laws via the charter of fundamental rights?
It is truly a bizarre spectacle. The Chancellor says that the level of regulation from the EU, which has cost British businesses £25 billion since 1998, is unacceptable, although he will happily sign up to a constitution that will extend the EU's legislative competences. Meanwhile, the Prime Minister says that "no one will support" an attempt to renegotiate the treaties that have transferred precisely those competences to the EU. In the Blair myth-making world, supinely and irresponsibly reflected in the Government's amendment to our motion today, which tries to claim that the debate is about being in or out of the EU, does that mean that the Chancellor wants to be out of the EU, or just out of his present job and into his next-door neighbour's?
The Chancellor's blundering admission also puts the Secretary of State for Trade and Industry—and her representatives today, as she is not present—in an uncomfortable position. It is the Secretary of State's habit to label as an extremist anyone who highlights the negative economic impact of Brussels legislation on British business and calls for a corresponding reduction of such legislation and legislative powers. They are no such thing. I hope that British business has taken note of the outrageous insult it is to all those risk-taking, wealth-creating business men and women that the right hon. Lady sees her job as getting in their way, rather than getting out of their way. It would be helpful if the Government and their Whips had not sought to peddle complete untruths in their amendment, which seeks to suggest that the Conservatives stand for withdrawal from Europe. That is the precise opposite of what is on the record, and of our policy.
Signing the EU constitution would be the final nail in the coffin of the Government's failed attempt to deregulate British business, given the already inordinate and disproportionate costs to UK business from EU-derived regulation. Recent research by the Conservatives in the House of Commons Library found that more than 60 per cent. of legislation is now European in origin. More than 80 per cent. of regulatory costs to British business since 1998 have resulted from Acts of Parliament that implement EU directives. That finding is astounding, but equally so is the fact that no one in the Government has ever bothered to establish for themselves that four fifths, or £25 billion, of the £30 billion cost of regulation to British business comes from Brussels.
Of course, some of the cost of overregulation is a result of the overzealous implementation of European directives into UK law—the phenomenon known as gold-plating. That appears to be another area of profound confusion for the Government. The Foreign Secretary recently told the CBI that
"we must ensure that we do not impose extra burdens on British business by 'gold-plating' EU legislation when we transpose it into our national law."
Meanwhile, the Minister for the Cabinet Office recently informed me in a parliamentary answer that the Government explicitly reserve the right to gold-plate, when he stated that "Cabinet Office guidelines" include
"options that could go beyond the minimum necessary to comply with a European directive . . . particularly where the original directive is unclear"—[Official Report, 30 April 2004; Vol. 420, c. 1319W.]
If directives are unclear, surely that requires earlier action to amend or forestall them. We should stop them in their tracks, not, as the Government prefer, gold-plate them just in case.
The problem of gold-plating is compounded by the Government's failure properly to scrutinise directives in the first place. An independent report on gold-plating recently commissioned by the Foreign Office states:
"During negotiations on a Commission proposal for a Directive, the UK is often represented by a junior officer with no legal training or experience, who attends meetings in Brussels without support, in particular full-time legal support".
That situation is clearly unacceptable, and a future Conservative Government would take urgent measures to ensure that the British representative was appropriately senior and authoritative, and had the appropriate legal backup, to ensure that the UK representation at that vital early stage in the regulatory process was more effective—not least, that it could head regulation off.
The substantial facts about Labour's failure to deregulate business are glaring. Deregulation is for Labour Members a word like "constitution"—they whisper it, or fear to use it. We will shortly hear much rhetoric about better regulation and regulatory simplification, but those are smoke and mirrors: mechanisms, processes and structures that seem to do everything but reduce the amount of regulation coming out of the conveyor belt of Westminster, Whitehall and Brussels. A case in point are the regulatory reform orders, which one of the Secretary of State's predecessors described as
"a powerful and flexible tool to strike down or change unnecessary or over-complex regulation"
when they were created in 2001. Between 2001 and 2003, the Government passed 12,450 new regulations. How many regulatory reform orders did the Department of Trade and Industry introduce in that time? One. That would be comic, were the issue not so serious.
When Labour Members speak, they will tell us that previous Conservative Governments regulated. Of course they did, but they did so half as much as this Government, averaged out on an annual basis. In case there is any remaining doubt that the Conservatives are the only party to take business deregulation seriously, let me say that the Leader of the Opposition, my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), has already made it clear that a future Conservative Government would include sunset clauses wherever possible in new regulations originating in the UK, would seek the return to our national control of the matters covered by the social chapter and would seek a genuine application of the principle of subsidiarity by returning powers from Brussels in much the same was as, for example, the current Dutch Government suggested earlier this month that they would like to do. Indeed, the contrast between
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the Dutch Government, who recently submitted to Brussels a list of 2,500 EU regulations for removal, and this Government, who sent the European Commission only a vague letter mentioning just 13 directives as "priorities for simplification"—as we know, that does not mean deregulation—was extremely telling. That shows how seriously the Dutch, and how weakly the British Government, treat the subject of over-regulation of business.
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