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Brian Cotter (Weston-super-Mare) (LD): I agree with my hon. Friend the Member for Gordon (Malcolm Bruce) that this is a serious issue, and not one that is easy to address. Indeed, it involves many different issues. I was pleased to hear the hon. Member for Tunbridge Wells (Mr. Norman) talk about small shops, given his background.
Regulation has a disproportionate impact on small businesses, in comparison with larger firms. Small business people still often say that the Government do not understand their needs. As I have said before, I think that Ministers should consider a scheme whereby they and civil servants could be seconded to small firms—as has already happened with large organisations. Even a week working in a small shop or garage would educate them enormously about the problems experienced by small firms.
Small businesses feel that there is not enough consultation, and organisations such as the Federation of Small Businesses and the Forum of Private Business feel the same. They feel that they are sometimes not involved early enough in consultation about regulation, especially when it comes to regulatory impact
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assessments. As others have said today, it is important to ensure that such assessments are accurate, but we should also ensure that they are carried out at an early stage and published before primary and secondary legislation is presented to Parliament. Liberal Democrats feel that it would be better for them to be conducted independently than to be conducted by Government or civil servants, so that independent views could be obtained.
Any way in which the Government could reduce the burdens on small business and on business in general would be welcome, but let me echo the point made about inspection of small and other firms. Some 350 inspectors have the right of access to business premises. When the Liberal Democrats suggested that there should be a single inspector, we were asked how a single inspector could possibly understand all the different regulations and all the different aspects of regulation. That in itself is a damning indictment, suggesting that there are so many regulations that no single person could understand them. We still think that it would be better to have a single gateway inspectorate rather than 350 inspectors, all of whom must trundle through business premises.
In the short time that I have left, I express concern to the Ministers that the Small Business Service, which my party welcomed when it was introduced and which has done some useful things, has got slightly off track. In our understanding, it was to be an independent organisation—very much the grit in the oyster—to raise matters with Ministers from the outside. The Government have made the mistake, which we would put right, of making the Small Business Service part of the Government, rather than allowing it to be detached and able to say to them, "Hold on—we're representing business, and as the champion of small business we don't think that this regulation should go forward. We don't think that the Government are addressing the situation properly."
My party has many tangible proposals to put forward, including on the Department of Trade and Industry. We welcome debates of this nature as opportunities to put forward those points and to try to influence the Government and get changes made that will benefit business.
6.40 pm
Mr. Henry Bellingham (North-West Norfolk) (Con): I declare my interests, which are in the Register of Members' Interests.
We have had an excellent debate, and a lot of ground has been covered in a short time. We have heard from several Members who are highly qualified on the subject. Does excessive regulation matter, does it destroy wealth and what are its consequences? My hon. Friend the Member for Eddisbury (Mr. O'Brien) came up with one very important point on the UK's declining competitive position, when he referred to the World Economic Forum ratings in which the UK has fallen from fourth place in 1998—when we were behind just Singapore, Hong Kong and the USA—to 15th place now, behind many European countries including Holland, Germany, Norway, Switzerland, Denmark and Sweden. That was one of the most revealing points made this afternoon.
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We should examine declining UK productivity. Average productivity growth in the UK fell from 2.5 per cent. in the period between 1994 and 1997 to 1.6 per cent. in the period between 1998 and 2002. Average productivity growth in this country continues to trail that in the United States by a significant margin. That is why my hon. Friend the Member for Eddisbury was right to address that situation and make his serious points.
On the other hand, the Minister for Industry and the Regions, although she had some good points, was rather complacent. It is a great pity that she denied the figures from the recent report of the British Chambers of Commerce. That report, "The Burdens Barometer", calculated the combined cost of new regulations since 1997 and concluded that that figure had reached £30 billion. As my hon. Friend the Member for Tunbridge Wells (Mr. Norman) pointed out, those calculations derive from the Government's regulatory impact assessments, so for the Government to question those figures in their amendment is quite extraordinary.
The Minister was rather self-congratulatory on the wider economy and the overall unemployment situation. She can afford to be in some ways, for example when considering the 600,000-plus new jobs created in the public sector since 1997. However, as various hon. Members have pointed out, that is exactly the same figure as the number of jobs lost in manufacturing. Surely the growth in public sector jobs at that rate is simply not sustainable.
The Minister should be asking how much better the small and medium-sized enterprise sector would be were it not for the growth in regulation. The BCC report found that 85 per cent. of the 3,500 members surveyed stated their belief that their businesses would be more profitable were it not for increases in red tape. How much more corporation tax would have been raised if those businesses had indeed been more profitable?
The Government surely should be asking what will happen if the economy starts to slow, house prices slip back, equity release dries up, the jobs bonanza in the public sector becomes a distant memory and fuel prices go up. In those circumstances, the one remaining bright spot in the economy should indeed be the small firms sector—but not if it remains very heavily over-regulated.
As I said, we have heard some excellent speeches, and the hon. Member for Gordon (Malcolm Bruce) was right to refer to gold-plating. In fact, we had a rare experience this afternoon. Two Liberal Democrat Front-Bench spokesmen on trade and industry contributed to this short debate, but we are none the wiser as to what they would do with the Department of Trade and Industry. What they had to say was fascinating but flawed. Which Department would really stand up in government for wealth creation, enterprise and small businesses? To be honest, their ideas just do not stack up.
We heard from my hon. Friend the Member for Tunbridge Wells, who has huge experience in business and is always listened to with great respect. I was particularly interested to hear him make a simple but often overlooked point—that regulation, red tape and burdens always have a disproportionate effect on small and micro-businesses. He drew on his experience of
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running very large FTSE companies to point out that they have rafts of employees and managers who spend all their time looking at regulations, red tape and burdens, and who can deal with the associated pressures in a way that small and micro-businesses and sole traders simply cannot.
My hon. Friend the Member for Tunbridge Wells was right to point out that we should look not at how well we are doing compared with some of our European competitors, but at our wider global competitors. He was also right to point out that we need to look at the archaeology of some of the older regulations on the statute book—and to look very seriously at sunset clauses.
What should the Government do, and what would we do if we were in office? Well, we would stop legislating in many of these areas. For a start, we would have no more employment Bills and we would reduce the size of government. In 1997, the DTI budget was £3.06 billion; in 2003 it was just under £8 billion. In 1997, there were 9,302 staff in the DTI; by 2004 there were 11,474. Huge chunks of industry have been moved to the private sector. The DTI should be doing much, much less, but doing it far more effectively and much better. We feel very strongly that large government equals bureaucrats, which equals more interference, which in turn equals more regulation.
What else should the Government be doing that they are not? They certainly ought to ensure that their regulatory impact assessment regime is working properly. As my hon. Friend the Member for Tunbridge Wells pointed out, there is a cultural problem. Good rules count for very little if Ministers and officials trim evidence to fit policy conclusions that they have already reached. I urge the Minister and the Under-Secretary to look carefully at what David Arculus said in his executive summary. He does praise the DTI for some of its work, but as I pointed out in an intervention, he makes it equally clear that there is a long way to go:
"Good practice needs to become common practice",
"make culture change a reality."
The Government need to "deliver on deregulation" and to
"pay attention to paperwork burdens."
That report needs to be read in full.
What else should the Government do? They need to make some serious progress on Europe. The hon. Member for Edinburgh, South (Nigel Griffiths) is one of the best DTI Ministers we have had for a long time. He is indefatigable, and he has undiminished enthusiasm and a lot of energy. He goes round the country championing the cause of small businesses, but he does so with one arm tied behind his back because of this Government's obsession with Europe.
Only a Government obsessed with Europe would have given up and thrown away our hard-fought opt-out from the social chapter. That is why my right hon. and learned Friend the Leader of the Opposition was 100 per cent. right when he said recently:
"Reinstating the opt out from the Social Chapter will be a key priority for an incoming Conservative Government."
Without that, whoever is the Minister with responsibility for small firms, he will have one hand tied behind his back.
My conclusion is simple—we need to change what is happening in Europe, to change the culture in Whitehall, to deliver smaller and better government that gets off the back of business and enterprise, and to reverse the compensation culture. That is impossible under Labour. Labour Ministers, however well intentioned, will not succeed, because what is required is a change of Government.
6.50 pm
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