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Mrs. Theresa Villiers (Chipping Barnet) (Con): What every Government, including our own, have to realise is that it is no longer as easy to dictate to a whole industry or a market how they run their business, because, faced with unreasonable or excessive regulation, many can simply vote with their feet and relocate elsewhere. If consumers do not like the rules that the Government choose to impose on them, they can often easily avoid them by visiting a website based offshore or simply getting on a budget flight to a country where they are allowed to engage in the practice they want to. Legislators now have less power over our daily lives than they used to and Governments need to recognise that we live in a changed and globalised environment. That must affect how they design regulation, where they choose to regulate and where they acknowledge they should not.
Obviously, a degree of regulation is useful to ensure that markets work efficiently and consumers are protected, but it is clear from the debate that the Government have imposed an excessive amount of regulation. They are not solely responsible for the problems, because the EU is another cost driver. A range of international organisations, many of which are increasingly opaque and unaccountable, also shape regulation in this country, such as the Financial Action Task Force, the World Intellectual Property Organisation, the World Trade Organisation and the Bank for International Settlements. We need to look at how such organisations work to try to reduce the flow of regulation that we receive from them.
As we have heard, it is the natural instinct of a legislator to regulate. In a sense, that is what many people feel they are in this place to do, and we must produce a political counterweight to that instinct. With hindsight, when a risk emerges, no legislator wants to be part of the Government who failed to regulate it away, but we need to acknowledge that we cannot regulate away all risk and we should not try to do so. One problem is that the legislators who produce new laws do not have to foot the bill—it is not like advocating more public spending. The people who actually have to pay the bill for new regulation are businesses, their customers and their employees whose jobs are threatened.
I want to consider briefly some of the ways in which we might produce a genuine political counterweight to the urge to legislate. All Governments talk about deregulating but few deliver on it. As many speakers have said, we need to ensure that legislation is properly costed and that a proper cost-benefit impact assessment is made before the decision to legislate. We need to consider whether legislation is necessary or whether competition could provide an acceptable solution to the problem. Is there a real market failure and, if so, is legislation the best way to tackle it?
To make a reasoned judgment on those questions, we need serious, effective and sound regulatory impact assessments that provide a range of options. As we have heard, RIAs are too often bland, superficial and self-serving. It is vital that they present decision makers with various options—including that of no action at all—from better enforcement of existing rules to small-scale changes in the regulatory structure of significant new legislation. Options to exempt small businesses should
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always be considered but they are not a panacea for over-regulation, because jobs can be threatened by the over-regulation of large businesses, too.
When the National Audit Office looked at the RIAs produced by the Government, there was concern that only two in the sample contained a series of options for Ministers. We can contrast that with the situation in other countries. For example, in Australia, the assessment for the Fuel Quality Standards Bill included seven options and 40 pages of in-depth analysis. We need more research into standardising and strengthening the analysis of the decision on whether to regulate or legislate. We need more standardised and rigorous data collection.
The Treasury green book "Appraisal and Evaluation in Central Government" identified another problem:
That is classic Treasury understatement. There is perennially a bias in favour of an optimistic approach to the usefulness and effectiveness of regulation.
As well as improving the analysis of cost impact assessment, we need to increase the political weight behind it. Cost assessment should ideally be conducted by an agency that is independent of Government. Again, there are precedents overseas. In the Netherlands, such a model has been successfully pioneered.
Another option is to grant affected parties the right to challenge a piece of legislation in the courts if no proper cost-benefit analysis was conducted. That has worked well in the United States, where the courts have begun to strike down secondary legislation if it is not properly costed.
Above all, it is important that, when the House signs off a piece of legislation, we do not consider that our job is done. We should continue to assess and review whether the legislation should remain on the statute book, especially in the case of EU directives. There should be a built-in method of assessing whether they should remain. Ideally, almost all regulation should be subject to sunset clauses. There should be regular review of absent sunset clauses and of cost impacts to see whether the original problem has been solved or whether it could be dealt with by competition. We need to consider whether our existing law is still effective in solving the problem. The House should make such review a priority, as it is vital to securing both the competitiveness of our nation and our continuing prosperity.
9.35 pm
Mr. David Gauke (South-West Hertfordshire) (Con):
We have heard Labour Members boast about the 2 million new jobs that have been created since 1997, and a number of Conservative Members have pointed out that many of those jobs were in the public sector. However, we should acknowledge that some of those jobs are in the private sector. Indeed, I come from one of the growth areas in the private sector: a few weeks ago, I worked as a lawyer specialising in financial services regulation, which is a booming part of the economy because of the ever-increasing rules and regulations applied by the Financial Services Authority. Even quite large and sophisticated financial services firms require assistance in dealing with the authorised persons regime,
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with money laundering, as we heard earlier, and with the whole application process—a welter and gamut of areas that require detailed technical assistance. I am afraid that that is not untypical and that the same thing could be said of a number of other parts of the economy.
Let us take the FSA as an example. A lot of the rhetoric that comes from the FSA is highly encouraging and welcome. It talks about a risk-based, principle-based approach, which is largely welcomed in the industry. However, what we often get with regulators and, I suspect, with the Government is that, while much of the rhetoric and intent is welcome, it does not work out in reality. Although the talk at senior level is of a risk-based approach, when it comes to transmitting that in practice, what we get is a much more rigid adherence to detailed rules—a box-ticking approach. That is what a lot of the industry finds.
I know from personal experience and from a study carried out by the Centre for Policy Studies that such things are common. It is no surprise, that even the Prime Minister recognises some of the difficulties with this specific issue. He says that
"something is seriously awry . . . when the Financial Services Authority . . . is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone".
Of course, that contrasts with the Chancellor's approach when he says that the FSA is a world-leading example of how to regulate financial services, but perhaps I shall leave that aside for a moment.
I quoted the speech that the Prime Minister gave to the Institute for Public Policy Research on 26 May. I have read through it, and it is a reasonable and impressive speech, but it contrasts with the Minister's speech, in which he painted a picture of a world where regulation was not a problem in business, in the public services or in the voluntary services. Everything seemed to be absolutely fine. However, the Prime Minister in referring to "intrusive regulation" said:
I should have thought that this evening provided an ideal opportunity for Labour Members to recognise the problem, but there is no sign of them doing so whatever. It is also worth pointing out that the Minister quoted a couple of senior Conservatives who, after leaving government, spoke about the difficulties of deregulation. It appears that the Prime Minister is even more advanced, because he has not yet left the Government, but already recognises the Government's difficulty in deregulating.
I shall move on to other areas. I referred to financial services and, of course, business regulation is a key aspect, but let us also consider local government. My constituency faces a specific health and safety problem with monuments in cemeteries. There is a legitimate health and safety issue with such monuments because some tragic incidents have occurred in recent years. However, a disproportionate approach appears to be applied by the Health and Safety Executive in requiring that every monument, even if only 18 in or 2 ft above the ground, must be rigorously tested and removed. That causes a great deal of concern for my constituents and a degree of sensitivity.
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I also wish to touch briefly on the voluntary sector, which has not been referred to in the debate. I have spoken to charities in my constituency that find that they are losing volunteers because of the increased burden of bureaucracy. Volunteers are driven away by having to carry out risk assessments, the training requirements and the delays in charities being able to make use of them because of those requirements.
The Government must recognise a problem in this country with regulation. A remote Government set rules but, by the time they are transmitted, they cause enormous difficulties—be they in our public services, our voluntary sector or in business.
9.40 pm
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