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Mr. William Cash (Stone) (Con): Would my right hon. Friend not like deregulation of European legislation as well?

Mr. Redwood: Of course, I would. There are some European items among the 63 in the agreed party programme, as it is impossible to deregulate in Britain without deregulating matters with which Brussels is involved.

The second big problem with the Bill is the inclusion of an offensive group of clauses that gives Ministers the right to legislate without reference to Parliament. The Bill does not even specify that it has a deregulatory purpose. We were invited to accept a Bill that could re-regulate Britain, taking more of our freedoms away without due process. I hope that Ministers accept that that was a gross error and a huge misjudgment. The country desperately needs proper deregulation, and a Bill is proceeding through Parliament that would allow us to achieve that. We would be delighted if the measure were subject to major amendments and surgery. We would be willing to co-operate if the Government dumped the clauses that give them too much power to legislate by the back door and included in the Bill some genuine deregulation.

John Bercow : My right hon. Friend will probably recall as well as I do that the right hon. Member for North Tyneside (Mr. Byers) talked about the case for sunset regulation as long ago as 2000, but little has happened since. Given that more than 99 per cent. of businesses in this country employ fewer than 100 people but account for approximately 50 per cent. of the private sector work force and generate two fifths of national output, does he not agree that it is time that the   Government looked at, and learned from, the experience of the United States by studying the Regulatory Flexibility Act 1980 and the Small Business Regulatory Enforcement Fairness Act 1996? If they did so, they could learn a great deal.

Mr. Redwood: My hon. Friend makes an extremely good point, and I agree with him. I would, however, like to go further, as I do not want to deregulate just one sector of trade or commerce, or one size of company. I accept that small companies are badly oppressed by too much regulation, but we could strip out some major regulations for everyone. Earlier this week, the Minister and I debated the regulation of financial services in Committee. I made the point that I agreed with the Government's rhetoric on the system of regulation for the European Union as a whole and the United Kingdom in particular. The Government said that competition was better at regulating than regulators and that greater freedom produced enterprise and flexibility. The Minister said that I did not need to tell him that competition was the best regulator, as the Government understood that intuitively.

I am delighted that we agree about what we wish to do, but the difference between us in our current roles is that the Minister has the power to do something about
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it, but I do not. Now that we have agreed on the remedy, I urge Ministers who have the power to put it into effect to get on with it. We all know that the country is crying out for less regulation and that far too much regulation comes from Brussels. Treasury Ministers say that they have a unique relationship with their European partners; they have enormous influence and Europe is going their way. They say that they want a less but better regulated Europe. When will those fine words translate into action? Since the Prime Minister last spoke about the need for a deregulated Europe, 2,000 new regulations have been introduced. Why did the United Kingdom sign up to all those regulations? Why did we not use our influence to say no? Why have we signed up to a 72-point action programme for financial services in Europe when the required regulation is either already in place nationally or will be put in place globally? When we know that we need to compete in a global marketplace, is it not much better that regulation is put in place globally, so that we are competing on a level playing field with the Indians, the Chinese and the Americans, as well as with the French and the Germans? There is no need for mezzanine regulation in big global areas such as financial services or some of the other leading globally organised industries. There may be some need for global regulation, and that surely is the level at which Ministers should concentrate their attention.

The Chancellor rightly said that the world is changing extremely rapidly. He rightly drew attention to the growing competitive challenge from India and from China. He may also have mentioned Brazil and Russia. The new large economies are growing very quickly. They are importing a great deal of technology and ideas, and in some cases they are exporting a great deal of capital because they are generating very large surpluses. The pattern of world trading is changing extremely quickly. We must understand that for Britain to have a prosperous future, as she has had a prosperous past, we need to turn our attention much more to countries of the size and pace of change of India and China.

Britain's great advantage in the next 30 or 40 years is that we have a special relationship with India. We have strong ties, a common language for business and political purposes, and quite a lot of common systems as a result of our shared history in the 20th century. We need to turn that to good effect and play the game in the spirit of the recent cricket exchanges, where India won one and we won one. We need to develop that relationship as strongly as we can, because it will help pay the livings of our children and grandchildren in the future.

Mr. Andrew Love (Edmonton) (Lab/Co-op): I have followed the right hon. Gentleman's speech with interest. On the productivity challenge, which I accept, he has not touched on the conundrum of business investment. Companies in the UK are making what some would consider record profits. Interest rates are low. There is a crying need to improve our productivity, even in the private sector, although I take some of the points that the right hon. Gentleman makes about the public sector. How do we overcome that problem?
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Mr. Redwood: That is a very good question. I have shortened my remarks because I know that other hon. Members want to speak. The point of my argument about pensions answers the hon. Gentleman's point about investment levels as well. The main reason that British companies are not investing more in plant, equipment and new ideas is that every spare pound they generate is likely to have to go to make good the deficit in their pension funds—deficits that are being exaggerated or made worse by the actuarial advice on and by the method of compensation of the value of assets and liabilities.

If the Chancellor takes the pension fund problem seriously and can find some kind of regulatory amelioration, the hon. Gentleman will find that more of that cash flow will become free for expenditure on improving the real assets of the country and generating more wealth. Similarly, more money will be available for equity investment through the stock exchange. There is not so much equity investment available from British sources through the stock exchange for exactly the same reason—people are told to put their money into bonds, not into new share issues by companies, which could otherwise finance new ideas, new technology and extended ideas for companies.

My concluding point is on the change in the world. According to the European Union's projections, which are a little out of date as they were issued in 2002, the 15 main EU economies, which represented 18 per cent. of world output in 2000, would represent only 10 per cent. of world output by 2050. I think that is a wildly optimistic forecast on the part of the European Union. If one looks at the pace of change, the relative decline of some of the continental economies and their populations, and the enormous success of India, China, Brazil, Russia and the other emerging countries, one realises that there is no way in which the EU 15 will still represent 10 per cent. of world output by 2050.

Mr. Cash: Did my right hon. Friend notice the way in which the Chancellor of the Exchequer in his speech this afternoon distanced himself from the eurozone, but did not go one step further and say that the Government had made a terrible mistake in committing themselves to the euro, the ERM, the constitution and all that goes with it? For practical purposes, he is prepared to criticise the European Union but not prepared to go that step further and say that we will have nothing to do with that aspect of it.

Mr. Redwood: My hon. Friend is right. An honest Chancellor would have said, "The game is up. I now realise that joining the euro would be quite inappropriate for Britain and we would be much better off getting our regulations into line with the leading countries and power blocs in the world, not regulating at the mezzanine level in the European Union." This is the point. On its own figures the EU will almost halve as a proportion of world output. On more independent figures, it will not do that well. It will fall even more, and we will not be earning our living sufficiently if we hitch our wagon entirely to the European train or bus. We need, instead, to be aware that the life and growth in the world economy will be in America, India, China and the other emerging countries. Our foreign policy should be geared to that, and so should our economic and regulatory policy.
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For the information of Labour Members, I have spoken as the Member of Parliament for Wokingham. I have not bound the Front Bench team by what I have said, nor have I bound my economic competitiveness policy committee. We will report, I trust, next summer and it will give me great pleasure then to speak for that. I am not backtracking on anything. I have expressed my views in my capacity as the Member of Parliament for Wokingham, the proudest capacity of all that I hold,   and if they in due course are adopted by the committee, I shall be delighted. If the committee's recommendations in due course are adopted by my party leadership, I shall be delighted. I thought Labour Members should know that.

3.16 pm

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