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Mary Creagh (Wakefield) (Lab): Before I came to the House, I was fortunate enough to do a job that I loved. I was a lecturer at Cranfield School of Management. Over the past seven years I have helped scores of my students to start their own businesses, and have helped scores of entrepreneurs to enable their businesses to grow profitably. The businesses range from Moonpig.com, an online greetings card business, to Real Burger World, a slow-food burger company in south London which I heartily recommend to Members. I also advised many companies whose representatives took advantage of Cranfield's business growth programme. When I talked to those people I heard many complaints about cash flow, about late payments from suppliers and customers, and about the difficulty of growing a business while keeping it profitable.
Better regulation was not the subject of the biggest or the most important complaints. My students came from all over the world. Many chose to start their businesses in Britain rather than in their home countries because our barriers to start-up are among the lowest in the world. Being an academic, I did not rely on my own words. I showed the students reports from the Organisation for Economic Co-operation and Development to prove my point that our low-regulation environment would prove helpful to them.
Britain is also attractive to companies starting their businesses because of our relatively well-developed venture capital markets, both the private-equity and the more formal markets. It is time-consuming for companies to find private equity, but it is easier here than it is in other European countries. Our banking sector is more competitive than those in other countries. Owner-managers often told me that what mattered most to their businesses was a sympathetic bank manager—or finding one after disposing of an unsympathetic bank manager.
We have heard a good deal about small businesses today. They are the engines of innovation in our economy. When I worked in a high-tech university, I
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saw how the teaching company scheme—later rebadged as the knowledge transfer partnerships—enabled universities and businesses to spin out new technologies and help the country to innovate. Under this Labour Government, the science budget for biotechnology and nanotechnology is nearly £3 billion, compared with a meagre £1.3 billion in 1997.
Fostering an enterprise culture is vital to Britain's economy. In my constituency we have a healthy mix of large and small companies, and unemployment is at a record low at 2.5 per cent. Businesses are enjoying business rate relief. Rural businesses are enjoying rate relief of up to 100 per cent. in villages containing fewer than 3,000 people. Many of them are enjoying 100 per cent. tax write-offs for their investment in new technologies, in research and development and in computers.
The enterprise culture that we have heard so much about is flourishing—at the moment—but regulatory reform should always remain a goal of any Government. Such reform should have clear public policy goals. It should allow small businesses to compete effectively against large companies, and allow them to compete for public contracts; we in this country have not always been successful in that regard. Such reform should also ensure that smaller and larger companies have equal access to finance. However, it should also remember that business takes place in society; that the environment should not be polluted; that fly-tipping instead of paying for waste disposal is a crime; that employees should have training in machinery and health and safety; and that no construction project or "dream building" is worth the life of a worker who is killed or crushed by machinery. One person's "regulation" is another's health and safety.
Regulatory reform in the UK must take into account three issues. First, we must ensure that regulations coming from the EU do not have a disproportionate impact on our small businesses, an issue about which we have heard a lot this evening. I am delighted that one of our priorities for the EU presidency is to lead the way on better regulation, and to ensure that fewer regulations come from Brussels. We have been successful in taking that message to other European countries, and there is a willingness to learn and to share our experience. But I also welcome legislation from Europe that helps our small businesses to compete better in a global marketplace. In an increasingly integrated world, we must ensure that our small businesses can grow internationally, as well as nationally.
The owner-manager of one of the small businesses that I used to deal with ran a container business. A change in EU regulation meant that for a short time, his was one of the few companies in the UK—indeed, in Europe—producing EU-compliant oil drums. That was clearly wonderful news for his business, because for a short while he was able to enjoy that rare thing that most businesses dream of—a monopoly. In our efforts to make the best, most environmentally friendly products in Europe, legislation can in fact act as a market opportunity, in which our world-class businesses can compete and thrive. Indeed, the right hon. Member for Wokingham (Mr. Redwood) told us how telecoms benefited from the opening up of EU markets in 1998.
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Secondly, if we are to achieve better regulation, regulatory reform must try to simplify existing regulation. The March 2005 Budget included a radical overhaul of regulation. We have heard about the twin-track process—one in, one out—whereby any legislation that imposes regulation is accompanied by a compensatory measure to simplify legislation.
Thirdly, we must reduce the burden of inspection across all services and businesses, public and private. I am very glad that our excellent councils are being relieved of some of the comprehensive performance assessment inspections to which they have been subjected. A risk-based approach to inspection means lighter inspection for businesses with a proven track record, and a heavier regime for those that continually fail to meet social, environmental or regulatory standards. That is not bad for business; it is good for society and it is good for good businesses.
Let me return to the companies that I spoke to in my seven years helping people to start their own businesses. They all told me that the most important thing that a Government can do for them is to keep interest rates low and to keep their borrowings down. They remembered the banks knocking on their doors in 1991, when interest rates hit 10 per cent. and peaked at 15 per cent. They remembered 1992 to 1996, when 1,000 businesses a week went bust. They do not want a return to Tory boom and bust, to
"15 per cent. interest rates, sky-high mortgage arrears, negative equity, bankruptcies, entrepreneurs giving up the ghost on private-run companies and a lot of people losing their jobs. I don't think there was a family in the country that didn't experience at least one of those anguishes."
So said the right hon. Member for Wokingham in a speech to the Bow Group on 26 October 2004. Those companies want an educated work force. They want to give something back to the society that buys their products and services.
Let us put regulation in its place; it serves us, not the other way round. Small businesses are run by human beings with families who understand the pressures of the modern world. When the Government were introducing maternity rights, one owner-manager said to me, "All this talk about not employing pregnant women—I'd hire someone who was nine months' pregnant if she was the best person for the job." Small business owners live in the real world, and they want real-world solutions. They know that without maternity leave and without women having babies, they would have no customers for tomorrow's products and services, and no staff to make or market them.
There was much talk from Conservative Members to the effect that the minimum wage would cost British jobs, but they were wrong. Does giving new fathers two weeks off to learn how to change their baby's nappy mean the end of the business in which they work? Not if the business is any good. Does giving employees the right to take four weeks' paid holiday mean that companies will plunge into the red? Not if the business is any good. This is not bossiness gone mad, just good business.
I want better regulation and smarter regulation. Instead of seeing it as an added layer of bureaucracy, we should see it as a smarter way of working. The Government are trying and succeeding on deregulation.
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We have gone beyond exhortation. I welcome the measures that we have taken to boost this country's economy and productivity and to create a healthy, thriving small business sector.
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Mr. Brooks Newmark (Braintree) (Con): I would like to thank the hon. Member for Wakefield (Mary Creagh) for her contribution. I felt that, with her experience of small business, she made some very sensible points, particularly about the need to strike a fair balance with regulation. Nevertheless, I would like to remind Labour Members of their 1997 manifesto commitment:
"We will not impose burdensome regulations on businesses, because we understand that successful businesses must keep costs down."
As we have heard from many Members this evening, earlier this year the British Chambers of Commerce published its latest findings, showing that the costs of new business regulations introduced since 1997 are now approaching £40 billion. That figure actually excludes the national minimum wage. It does not include it, as the hon. Member for North Norfolk (Norman Lamb) claimed. Indeed, the CBI has said:
"The Government must stem the red tape tide and make the regulatory environment more business-friendly. There is a pressing need for regulations to be cut-back and simplified."
Nevertheless, the Government announced back in August 1998 that no policy proposal that had an impact on business, charities or voluntary bodies should be considered by Ministers without a regulatory impact assessment first being carried out.
While regulatory impact assessments are in theory required to estimate the costs and benefits of regulation, there is no indication in the Cabinet Office guidance notes that proposed regulations should be aborted if, as is increasingly the case, their costs to business are found to outweigh their benefits. Indeed, the British Chambers of Commerce found that 23 per cent. of the RIAs it sampled in 2002–03 did not even attempt to quantify costs to business, and that 71 per cent. did not quantify the benefits.
Another problem is that the scope of cost-benefit analysis carried out in regulatory impact assessments is drawn extremely widely. The former Cabinet Office Minister, now the Minister for Europe said that an RIA procedure
"requires the responsible Minister to certify that he or she is satisfied that the benefits of the proposed measure justify its costs. The Minister will consider the full range of benefits arising from the measure, including social, environmental and economic".—[Official Report, 22 July 2004; Vol. 424, c. 515W.]
However, there is no objective way of measuring social or environmental benefit. RIAs can easily be reduced to subjective impressions. Furthermore, there is little scrutiny of the extent to which the particular costs and benefits predicted by officials prove accurate, once regulation actually comes into force.
Professor Ambler and Francis Chittenden, who studied 165 of the 197 RIAs published between July 2002 and June 2003, found that
"in many cases completion of RIAs remains a bureaucratic task to be despatched with as little effort as possible."
That impression was reinforced by a Government special adviser, who told the Social Market Foundation's regulatory best practice group:
"They have never made any difference to our work—we've got commitments to discharge and we're not going to let procedure get in our way."
So far, approximately 1,100 regulatory impact assessments have been issued since their introduction in 1998. In his study on behalf of the British Chambers of Commerce, Professor Ambler notes that in:
"many cases regulation is transferring government's administrative and social policy onto industry. In other words, whether intentionally or not, many regulations act as a form of taxation."
A good example of that may be seen from the current proposal for the Inland Revenue to take on the role of calculating and paying statutory maternity pay, maternity allowance and statutory adoption pay. The partial RIA on that topic states that it will cost the Inland Revenue £55 million in one-off costs and £26 million a year in ongoing costs to take that work over from employers. Since employers are currently required to administer those payments on behalf of the Government, employers are effectively contributing a lump sum of £55 million plus £26 million per year to the Inland Revenue.
I would therefore draw the Minister's attention to some of the BCC's recommendations on ways to improve RIAs. First, a Minister agreeing to an RIA where the quantified benefits do not appear to exceed the costs should explain why, in his or her view, the RIA is justified none the less. Secondly, Ministers, when signing, should also certify that the RIA meets the Cabinet Office guidelines and justify those areas where it does not. Thirdly, where consultees provide estimates of costs and benefits, a summary of those figures should be reported in the RIA. If those figures differ significantly from the Department's own estimates, a review date should be set—it suggests within two years—to examine the actual costs and benefits, as the guidelines already suggest in all cases. If, on completion of the review, it becomes apparent that the costs of the regulation are not justified by the benefits, the regulation should be revised or repealed.
Fourthly, sunset clauses should be used, except where the Minister, when signing, explains why it would be inappropriate in a particular case.
Fifthly, the Better Regulation Executive should maintain an up-to-date database and website of all RIAs, which should be serial-numbered and linked to relevant documents.
Finally, the BRE should publish an annual report, audited by the National Audit Office, of the Government's regulatory performance and compliance. That report should include additional costs and benefits arising from major regulations that have a significant impact on society, the economy and the environment.
Overall, however, the real objective is the need to achieve a significant net reduction in the regulatory burden presently placed on business.
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