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Mr. Hutton: I promise that this is my last contribution to our debate. The hon. Gentleman surprised all the Labour Members in the Chamber by saying that he is going to support the Conservative motion. I checked his manifesto, but I could not find a single reference to regulation, so he is obviously borrowing Conservative policies. Can he confirm that in his new-found support for better regulation he is abandoning the Liberal Democrat plans to introduce dog licences again, which is the most absurd regulatory burden that anyone has devised for a long time?
Another example of regulation that provides important protection for employees is the minimum wage legislation. The hon. Member for Normanton (Ed Balls) challenged the right hon. Member for Wokingham (Mr. Redwood) to say whether he supported the minimum wage. We did not receive an answer to that question. Assessments of the total cost of regulation on business, estimated to be about £40 billion by the British Chambers of Commerce, attribute about £13.5 billion to the minimum wage, yet there is now widespread support, even within the Conservative party, for the principle of the minimum wage. Many people would argue that it has improved the labour market and pushed companies higher up the value chain, so it is another example of regulation that protects employees and is regarded as beneficial.
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Rules or regulations are necessary to protect consumers; to ensure that companies do not exploit monopoly positions and to make them behave properly, through prudential financial controls, for example; and to ensure that consumers can make informed choices. Regulation to protect the consumer is going through Parliament at the moment. There is argument about some important details in the Consumer Credit Bill but, even though it increases regulation on business, it is broadly supported by the Conservative party as well as by the Liberal Democrats. Finally, rules and regulations are necessary to protect the environment. The market does not understand the imperative of tackling global warming, so a mixture of regulation and other market-based mechanisms such as emissions trading are necessary to change corporate behaviour.
We should avoid the temptation to condemn all regulations or rules. Some Tories rail against the very idea of business regulation, but our attack must be targeted on excessive regulation or regulation that is disproportionate to the mischief or problem; well-intentioned regulation that has unintended consequences; and regulation that addresses an important issue in a bureaucratic and burdensome way. For example, to a provide a framework of protection against various forms of discrimination, this country, with the help of the European UnionI am sure the right hon. Member for Wokingham would agreehas developed myriad rules on discrimination that are so detailed and complex that they fail adequately to protect the citizen. They are quite impenetrable to many people, and leave most businesses unaware of the extent of their responsibilities.
The answer is a single equality Act, as proposed by the Liberal Democrat peer Lord Lester. That reform would be a significant deregulatory measure, and it is frustrating that the Government have not acted on the proposal. The case for it is overwhelming: we could remove a vast quantity of regulation and rules on discrimination and replace them with a much simpler framework. It is not just regulation that we need to address: there is a great danger of regarding deregulation as a panacea. Indeed, the motion concludes that deregulation and better regulation would
"the main challenges that the UK economy faces are not exclusively matters of regulation or deregulation, but in areas . . . including skills and training, R and D, and technology transfer, the supply of capital for investment, and narrowing the productivity gap with our competitors."
The Government are right to point out in their amendment that in some respects the UK is seen as a leader in regulatory reform, certainly in the European context. The United States started a much more systematic analysis of Government regulation back in 1993 under President Clinton, but, ahead of much of the European field, with the clear exception of Holland, the
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UK has developed the concept of the regulatory impact assessment, with which the Minister dealt in his speech. The problem is that in our view it does not work as intended. I list some of the criticisms.
First, the Government have all too often failed to follow their own rules when preparing regulatory impact assessments. Secondly, the RIA is carried out by the Department that seeks to implement the regulation. There is a danger that it will simply be self-serving. No outside body reviews the RIA once it is prepared. The National Audit Office may look at it after the event, but there is no independence in the process.
Thirdly, by the time the RIA is carried out, the momentum to introduce the measure is often unstoppable. It happens too late in the process. Are we ever told, for example, that an RIA has resulted in the decision not to proceed with a new regulation? One suspicion is that that never happens. I would be interested to hear from the Minister whether there are ever occasions when RIAs reach a conclusion that a regulation should not proceed. We are never made aware of that.
Fourthly, the assessment of impact on business is often insufficiently robust and there is no standard process for revisiting the regulation once it has been in force for a time to measure its actual impact and to compare the reality with what had been predicted in the original RIA. Fifthly, there is insufficient transparency in the process. It is impossible to determine how the costing has worked and who has been consulted. Sixthly, and perhaps above all else, there has not been a sufficient cultural shift in Whitehall Departments. The pressure is still to regulate, rather than to make a genuine attempt to examine all other options for resolving a problem without resorting to regulation.
I suggest the following steps to help change the culture and slow the pace of new regulation. To start with, there should be some independence in the regulatory impact assessment process. It could involve an independent body conducting the assessment, or an independent assessment panel of suitably qualified individuals looking at the RIA once it had been prepared. The panel's conclusion would be available to Parliament before it considered the measure. This element of independence would focus the minds of civil servants and would be likely to act as a constraint on the flow of new regulation. It is an approach pioneered in the Netherlands with marked success.
Secondly, there must be much more effective assessment of impact. That would necessarily involve industry bodies more effectively in determining the likely cost of regulating, and also in examining whether there are alternative ways to proceed that would be more cost effective. Thirdly, there must be transparency in the process. Information, including the method of calculating the impact and all other background material, should be routinely published on the Department's website.
Fourthly, there must be a post-implementation assessment of each new regulation, perhaps three years after enactment. That could be carried out by the independent assessment panel that I proposed.
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Finally, each regulation affecting business should include a sunset clause, which would force a further assessment of its worth. If the Government wanted the regulation to survive, they would have to justify it again to Parliament.
So far I have dealt only with Whitehall. The process at European Union level is less advanced and even more disturbing. The flow of new regulations, directives and other EU decisions has grown massively over the years, peaking in 1998 at 3,901more than 10 a day. By 2003, the number had declined somewhat, but still it reached more than 3,400. We now have a European RIA of new regulations but it is rightly criticised for lack of rigour. A survey of a sample of EIAs, as they have become known, found that only half had quantified both costs and benefits. Too often they are nothing more than a flimsy paper exercise. The British Chambers of Commerce has found in a sample that 10 out of 12 UK EIAs carried out in respect of EU regulations were published after the regulations had come into force, thereby negating the entire purpose of the assessment.
All the proposals that I have put forward for the UK could be applied equally to the EU. I welcome the fact that the Cabinet Office has apparently today reasserted the Government's commitment to deregulation as a priority for the UK's EU presidency. Interestingly, it was reported in the Financial Times this morning that Ministers will advocate a new independent body to scrutinise proposals for regulation. If independence is appropriate for the EU, presumably it is appropriate also at national level.
There is an added dimension to the European level of regulation that merits consideration. Tim Ambler of the London Business School has highlighted that directives provide scope for interpretation at national level. Each member state can implement a directive in its own way. The process provides the opportunity for so-called gold-plating.
Logic suggests that if the measure is required at EU level, it should be implemented uniformly throughout the single market. That suggests that it should be implemented in a regulation that applies directly and does not involve any further regulation at national level, or it should be left to member states to decide whether to legislate. Going down the directive route inevitably involves legislation both at European level and member state level, leaving confusion throughout the EU and also leaving businesses and individuals unclear as to their rights. Tim Ambler highlights the risk of legislating at multiple levels of government, which ensures that there is a lack of clarity. That leaves the citizen entirely confused.
As well as being far more robust in our examination of regulatory proposals, we must seek to reduce existing regulation. Both at national and European levels there is a need to tackle the vast accumulation of regulation. There must be a rigorous approach to reducing and simplifying the burden, and the Dutch have again taken the lead. The Government have stated their objectives and they will be judged against their rhetoric. One approach that is worth considering is the one in, one out discipline. Every time a Department seeks to impose a new regulation, it would have to propose the cull of an existing one. The concept that the regulatory burden has grown large enough and that something must give to facilitate the introduction of a new regulation is logical and attractive.
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The Government have committed themselves to the rationalisation of compliance and of the enforcement regime. They talk about fewer inspections, especially where companies have a good record of compliance. If it happens, it should be welcomed. So far, delivery has not matched rhetoric. The burden on small businesses must be considered much further. The idea proposed that they should deal with only one official merits consideration.
The motion deals with the burden on local government, schools and hospitals. Just as companies are more likely to prosper if they have the burden of excessive centrally imposed regulation removed from them so local government could come alive again if it were liberated from central controls. The UK tops the league table for the proportion of taxes that are raised centrally, and that is combined with a denial of local autonomy.
Last year, the Treasury Committee visited North Carolina. We were examining how productivity had been improved in that state. Inevitably, education and training were central to the strategy that had been pursued. That state decided that it wanted to embark on a massive rebuilding programme to upgrade schools and colleges, put a proposition on the ballot paper for the state elections, and won overwhelming approval for the issue of a bond to raise the money.
No such autonomy is available in this country. We have developed a dependency culture that enables local government always to blame central Government whenever it runs out of cash or is prevented from doing something. [Interruption.] The hon. Member for Wolverhampton, South-West should listen instead of sniping at the Liberal Democrats.
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