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Mr. Michael Fallon (Sevenoaks) (Con): Is my hon. Friend aware that when we in the Treasury Sub-Committee visited the Netherlands, we met at the Dutch Finance Ministry a director of legislative burden who had a staff of 17, and who was charged with reducing the administrative and regulatory burden by 25 per cent. over four years? They were getting on with it; why cannot our Government?
Mr. O'Brien: I am delighted to hear of that experience. Of course, to change the culture of politicians and those who work in Whitehall, we need to incentivise them to be deregulators and to recognise that it is only the wealth-creating side of the economy—business—that gives our democracy the choices that we rightly demand and need. So it is absolutely critical that we make sure that the Government put in place the proper incentives to achieve such a change in culture and management. It is clear that such incentives are woefully lacking, because of the lack of political will on the part of this Government.
David Taylor (North-West Leicestershire) (Lab/Co-op): Will the hon. Gentleman not give at least some credit to the Government for their successes in the field of deregulation? I am thinking in particular of the statutory audit of companies. In 2000, the turnover limit was lifted to £1 million a year, thereby exempting some 150,000 companies from the requirement to have a statutory audit. This year, the limit was raised to some £5.6 million, thereby exempting a further 70,000 companies. Surely measures such as statutory audits are much more cumbersome and onerous than many of the regulations to which the hon. Gentleman is referring.
Mr. O'Brien: I have some respect for the hon. Gentleman's views and experience, and I am very glad that this Government have sought to follow the trajectory adopted by the previous Conservative Government. Of course, value thresholds must be revised in order to keep pace with events. In a prosperous economy such thresholds will not last for long, which is what we would wish for such businesses.
More importantly, we should set against such considerations the various measures introduced in recent employment relations legislation and through the implementation of the information and consultation directive. As a result, exemptions do not apply all the way down the chain of companies. Such measures have to be taken into account in determining the real costs to business. We need to consider the resulting effect on management time, distraction of attention and confusion, along with a lack of access to appropriate information and to quality, affordable professional expertise.
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Such issues need to be set against the point that the hon. Member for North-West Leicestershire (David Taylor) rightly makes, and we need to consider them as we examine our approach to deregulation, rather than picking out a single element. A Government who are neither familiar nor comfortable with the idea of the risk-taking, wealth-creating side of the economy will inevitably try to regulate it to fit in with their own culture. That is in contrast with the Conservative party, which understands that a democracy is best underpinned by—and is most likely to deliver quality of life, confidence, security and prosperity for its citizens through—a well-supported but ultimately undistracted business community.
My hon. Friend the Member for Huntingdon (Mr. Djanogly) introduced a ten-minute Bill to allow individuals or businesses adversely affected by proven gold-plating to force the Government to delete unnecessary provisions, or to revalidate them through primary legislation. Like the Bill proposed by my hon. Friend the Member for Tunbridge Wells, this Bill is a powerful potential weapon against the over-regulation that has been completely ignored by the Government, despite the fact that we have sought to be constructive by introducing such measures.
Mr. Redwood: I thank my hon. Friend for his generosity in giving way. I am delighted that he is against gold-plating, which is a very serious problem. But has he noticed that through the draft constitution, the EU will have a much more wide-ranging power to legislate directly, through both primary and secondary legislation? In some cases, commissioners will be able to put through secondary legislation with no reference back to elected politicians. Does that not mean that under the constitution—if it is accepted, and if the British people are foolish enough to vote for it—we will have gold-plating with knobs on from Brussels across the board?
Mr. O'Brien: I am grateful to my right hon. Friend, who will have heard the points that I made in precisely those terms earlier in my speech. I fully support his analysis.
The real issue, of course, is very much part of what happens in Europe today. I have had considerable experience of businesses trading across Europe and I know that businesses recognise a difference of approach. We know that one of the merits of our Anglo-Saxon culture—seen in America, Australia, Canada and here—is that common law helps to provide greater opportunities for flexibility and competitiveness. That stands in stark contrast to the more natural committee-based, codified continental system, which is incremental. Once one starts something, one tends to have to come to some result; one cannot simply draw a line in the sand and say that something is not proper or relevant for legislators and regulators to be involved with. We should enable businesses to be set free so that they do not have to worry about that. The EU constitution is precisely the worst example of that type of trajectory, which will over time cause businesses grave difficulty and a reduction in their competitiveness.
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Equally, we will focus on the spring—if I can coin that word—or underlying culture of regulation. Rather than opposing the tide of statutory instruments on an individual basis—clearly we do that from time to time in the Committee Corridor, but it would be an exercise worthy of King Canute against the incoming tide of regulation under Labour—we believe that a far more strategic approach is to tackle the drivers giving rise to the statutory instruments in the first place. Hence, as I mentioned earlier, the business experts whom we have appointed to our deregulation panel are, as we speak this evening, examining ways of reversing precisely those drivers of regulation.
Finally, I want the Department of Trade and Industry to act as a champion for business, not be the arch-regulator-in-chief against British business. What on earth was the Department doing when productivity growth was sliding away and the UK's competitiveness was falling from fourth to 15th place in the global rankings? It is not as if the Department were starved of resources: its budget actually went up from £3 billion to £8 billion over the same period, not least to promote and service all its burgeoning regulations on business.
The truth is that the Department simply used its bloated resources to intervene on markets, draft regulations and create new quangos. In that sense, over-regulation is an inevitable consequence of big government, which is one of the reasons why the Conservative party has always believed that the state should be small, the people should be big, and businesses of all sizes should be set free to prosper and grow. Over-regulation is the single biggest long-term threat to our future competitiveness in the global economy.
Dr. Doug Naysmith (Bristol, North-West) (Lab/Co-op): I thank the hon. Gentleman for giving way, particularly so late in his speech. He has made several references to financial services regulation and to an earlier Conservative Government. I am sure he recognises the importance of financial services regulation, so does he not feel ashamed at the lack of regulation that led to a number of very unrewarding outcomes for people who should be have been better protected by that Conservative Government?
Mr. O'Brien: In financial services, there will always be a degree of regulation, as there has been under previous Administrations of all colours. It is difficult for the hon. Gentleman to draw that rather partisan comparison when he supports a Government who have presided over the complete debacle over Equitable Life, which has affected so many of our constituents across the country. He should be careful to reflect on what motivates good behaviour and true management judgment. The last thing that underpins such behaviour and judgment are regulations which, although necessary to some degree in the financial services industry, are so extensive and tight that they remove the motivation to do the right things. We end up with stripped liability. It is not worth it. Everyone lives under threat, rather than benefiting from opportunities, though protections for consumers should be in place.
It is not as if I am alone in saying all this. Anatole Kaletsky recently noted in The Times:
"The consequences of over-regulation will be played out over decades, rather than months or years."
In other words, the fact that the economy has not yet fallen apart at the seams is an abject argument for the Government to make, even if it is their habitual response, because we are still trading off the relative competitive advantage created by the labour market reforms of previous Conservative Governments. That is one of the principal reasons why we have been fortunate enough to enjoy a sustained cycle of growth for the last 12 years.
I am pleased that, as a result of that 12-year cycle of growth, the number of new business registering for VAT was 175,800 in 2002—the last year for which figures are available—though I note that that is 6 per cent. down from 1997 when Labour came to power. No doubt the Secretary of State for Trade and Industry will repeat her spurious claim that
"in the 1990s, you needed 28 separate licences, certificates and registrations to create some businesses. Now the figure is one form for many sole traders; and five forms for private companies".
Of course, businesses such as those that clean asbestos needed those 28 steps and under current procedures they still do; licences and regulation are necessary when dealing with possible hazards. However, when I started companies in the 1980s and up to 1997, they were started by filling out—yes, Madam Deputy Speaker, you've guessed it—five forms. Where is the progress? Yet another bit of Labour spin squashed.
The Labour spin doctors may also want to clarify the discrepancy between the claim made by the Secretary of State for Trade and Industry in a Labour party press release earlier this month that it
"now takes an average of one day to start a business . . . in the UK"
and the Chancellor's more sanguine claim—amazingly—made earlier this week, that
"it takes 24 days to set up a business in the rest of Europe but . . . seven days in Britain".
Who should we believe—the Chancellor or the Secretary of State for Trade and Industry? Sadly, probably neither: perhaps the Government are missing Alastair Campbell after all.
The crucial test for the Government is whether British business will be prospering, innovating and expanding in a decade or more. Over-regulation is a poison that takes time to feed through the economic system—we need only look at Germany for an example of that—and there is only one antidote: a party committed to small government and big people, and a Government who get out of business's way—the next Conservative Government.
5.36 pm
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