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2.3 pm
Mark Pritchard (The Wrekin) (Con): I am grateful to be called in this debate, Mr. Deputy Speaker. First, may I apologise to the House for the fact that, unfortunately, because of a prior commitment, I will not be present for the winding-up speeches?
The Government are very much a Johnny-come-lately to deregulation. I have touched on the irony that the Bill creates more regulation and legislation in order supposedly to reduce regulation. By that very fact, and by their previous form in this area, the Government are very much the worst offender and they set the worst possible example to the nation at large and to large, small and medium-sized businesses.
Given that other hon. Members wish to speak, I shall limit my remarks mainly to small businesses and the Bill’s potential impact on them. Small businesses are the lifeblood of the British economy; more than 95 per cent. of businesses in this country are small businesses of 25 or fewer employees. Without such businesses and hard-working small business men and women, the British economy, and the economy in both my constituency and the fine county of Shropshire, would grind to a halt.
Yet, small businesses are increasingly feeling the tightening of the regulatory noose and the big foot of Government trampling over entrepreneurship and
innovation. What business men and women tell me—they mostly do so privately—both in my constituency and as I travel in different parts of the country is that they want Bolshoi light touch regulation, rather than the trampling big foot of Government. Regulation is not a bad thing in itself per se; it is not intrinsically wrong and it has an important role to play both in the private and public sectors—for example, in food safety, consumer protection and environmental health. However, many businesses feel that many regulations are unnecessary and burdensome, and they distract business people from their core raison d’être: creating jobs and investing in communities.
Money and profit have been mentioned in this debate, and there is nothing intrinsically wrong with them. If businesses are not profitable, they cannot grow, expand or employ people. If people are not employed, they do not have the disposable income that they need to go on holiday, to look after their families in the way that they want or, in this day and age of high food prices, to put a loaf of bread on the table. We should not confuse the important issues of profit and business, and the other social factors to which hon. Members referred.
It is not just Members of Parliament, either Conservatives or those in other parts of the House, who are aware of the burdens; the Federation of Small Businesses, the CBI, the Institute of Directors, the British Chambers of Commerce all testify to the fact that burdens on, and costs to, businesses are increasing, rather than decreasing. The CBI has said that since 1997, when this Government came to power, £55 billion-worth of new burden on business has been added. That is a huge sum, and clearly many casualties have resulted. Perhaps the Minister might tell us what research has been done with Companies House on the number of businesses—not only those that have gone into receivership, but those that have voluntarily wound up and have closed their companies—that have closed as a result of regulation and red tape.
Although I agree with many of the Bill’s sentiments, I am concerned that, once again, we are having more law, rather than better law. The Minister must answer another question: given that local authorities enforce about 80 per cent. of regulations and licensing procedures, and given that the need for enforcement continues to grow across the spectrum of various regulations, does he feel that those authorities are adequately and appropriately resourced to be given a greater role?
I am a member of the Select Committee on Work and Pensions, which recently reported on benefit simplification and found that there is still too much complexity in the benefits system. That is relevant, because Government need to set the right example—if Departments cannot do so, how can they expect small businesses to do so? The Government need to apply not only a light touch, but a lot more common sense.
I welcome many of the parts of this Bill, and many of the concessions and amendments made in another place. However, as it stands, the Government are not going to note the flaws that my hon. Friend the Member for Huntingdon (Mr. Djanogly) has rightly pointed out, and the Bill will remain a mess. I do not think that we will be able to support it in the way that the Government would want.
The suggestion that this Government will cut red tape and deregulate is as likely as the Prime Minister performing at a comedy club. If the Government are serious about this issue, they will listen to the concerns of my hon. Friend and of small businesses. It would be helpful if we had more Labour Members from a business background, but unfortunately very few are. I declare an interest as a former businessman, and my hon. Friend for a Northamptonshire seat—
Mark Pritchard: There are so many good MPs from Northamptonshire that I was confused. As my hon. Friend for Wellingborough (Mr. Bone) rightly said, every burden placed on small businesses carries a cost. That cost is not always necessarily financial—although often it is—because it can be in time, with staff distracted from the key issues of running their business, employing people and investing in communities. I hope that the Government will rethink their position on many aspects of the Bill.
2.11 pm
Mr. Peter Bone (Wellingborough) (Con): It is a pleasure to follow my hon. Friend the Member for The Wrekin (Mark Pritchard), who made a powerful speech today, as he did yesterday. I need to declare an interest—I refer Members to the register—as I am a director of a small company. I am also a member of the Institute of Chartered Accountants in England and Wales.
I am delighted to speak in this debate because of my personal background. I came to the House of Commons late in my career, mainly because the public kept rejecting me— [ Interruption . ] That is another issue. However, that allowed me to extend my business career. I started a company and went through all the traumas of growing it. Eventually it became a plc, and we sold it on and I started a new company. So I have some personal knowledge of the problems of regulation in business.
I have one story, about VAT inspection, that will illustrate some of the problems. At the time, my company was only small, with five employees including me. We were told that we were to be inspected by the VAT man. We were told the date, and we did an enormous amount of work laying out the books. Unfortunately, on the day there was heavy rain. The inspector was due at 9 am, but still had not turned up by 10, so we rang up, to be told, “Oh, he’s not coming, Mr. Bone, because it’s raining so hard.” That is the sort of thing that drives owners of small companies mad, but they have to put up with it. We were not even inspected afterwards: the inspection was abandoned. It felt like inspection for the sake of inspection.
Much of the merit of the Bill is that it would target rogue traders, or possible rogue traders. The Hampton review stated:
“During 2003...the local authority trading standards officers only inspected 60 per cent. of high risk premises in Great Britain, in 35,000 inspections, yet still inspected 10 per cent. of businesses classified as low-risk, in over 72,000 inspections.”
I understand that the Government now intend that high-risk businesses should be inspected more frequently, but they have not said that they will not inspect low-risk
businesses. If high-risk businesses are to be inspected at the rate that the Government suggest, we should be able to reduce the number of inspectors. Do the Government have a target for the reduction of inspectors every year, so that we can see that the decrease in regulatory inspections is actually occurring?
When I worked in business, I was also driven mad by conflicting advice from regulators. An inspector told us how to operate a VAT system for our travel business, but then three or four years later, another inspector came along and said that we had been doing it wrong and that we would be fined. We argued that we were doing what we had been told to do, but no, we had to pay the fine and change how we did things. As it turned out, we did not mind paying the fine, because the new way of doing things saved us an enormous amount of VAT. However, that should never have happened, because the procedure should be made clear to businesses. If the Bill helps to improve that, it should be welcomed.
The real problem is not the implementation of regulation but the fact that the Government create regulation at an enormous rate of knots. I have three ideas for cutting back on regulation. First, we should get rid of the regional assemblies. According to a left-wing think-tank, they cost taxpayers £360 million a year. They do not do anything, so we should get rid of them. Secondly, we should abolish planning appeals. Local elected councillors should be able to decide the merits of a planning application, and that would save millions of pounds. Thirdly, I cannot find anyone who thinks that the Standards Board for England is a good idea, so we should get rid of that. If the Government were proposing such measures, we might believe that they wanted to cut regulation.
The proposed LBRO—it does not have a very good title—should be extended. Why not have it cover the whole of government, not just local government? Why not call it the department for administrative affairs, and build up a big empire? Why not employ lots more civil servants to cut regulation? We could find a Minister to do that—perhaps a chap called Jim Hacker. This is straight out of “Yes Minister”. The Bill will create a body that will cost £73 million a year and employ huge numbers of bureaucrats, with the idea of saving money.
Another thing that used to drive me mad when I was in business was getting a letter from a Government organisation with no date or address, or with an illegible signature. I have a copy of the impact assessment by the Department for Business, Enterprise and Regulatory Reform—the second version, although I do not know why there were two—and the Minister’s signature of approval is a squiggle, so I have no idea who it was. The name of the Minister who signed off this document should at least be printed on it. Of course, the Minister may not want to be identified, because of the problems with the impact assessment.
We are told that the Bill will save businesses a lot of money, and the impact assessment contains some very good figures. The LBRO will cost £73 million a year, although that is a Government estimate, so we can at least double it. Let us call it £146 million for a start. The annual benefit to business, according to the impact assessment, will be £200 million, so we can halve that
to get the right figure, so it will be only £100 million. The result is a net loss of more than £40 million a year.
The impact assessment goes into detail about the different costs between local authorities and businesses. One very telling argument is the fact that the impact assessment says that the cost of the new department to local authorities is £13.6 million a year, which will provide a saving of between £14.2 million and £17.9 million a year. That is hardly any saving at all.
Everyone knows that local authorities are the most inefficient part of the whole system. They are far more inefficient than private businesses, but the Government are going to make a change that will cost the local authorities £13.6 million in order to save between £14.2 million and £17.9 million. We are told that it will cost businesses only £7.5 million, and that there will be a saving of between £59 million and £86 million a year.
I do not believe any of it. If we review the situation after three years—I am grateful for the remarks made by the hon. Member for Brent, East (Sarah Teather) on that subject—I do not believe that we will find anything other than a glorious empire with a Jim Hacker-type figure at the top and lots of people sending out lots of bits of paper, which will cost a huge amount of money and not save a single penny.
Mr. Gareth Thomas: For the sake of accuracy, perhaps I should inform the hon. Gentleman that the budget for the LBRO will be some £4.5 million and that it will employ some 25 staff; it will hardly be the Jim Hacker-style empire that he is describing.
Mr. Bone: I am not a betting man, but if I were I would certainly bet £5 that that figure would double, at least, by the end of the first year.
I shall conclude, because I know that other hon. Members want to speak. I have two points. On the EU aspect—this is a serious point—although the Government are right to try to have better regulation, that cannot be done without addressing the point that EU directives cannot be challenged or changed. I am talking about not their principles but their drafting. Sometimes, the EU directives that we see in the Joint Committee on Statutory Instruments are complete nonsense; they are gobbledegook. The Germans tried to change one so that it made some sense, and they were fined by the EU.
The directives are so confusing because they are designed to be confusing. When they were agreed to, the various different countries had different interpretations of them and came up with something that makes no sense and has no clarity. That is the problem for industry. For instance, it was impossible to understand what the European directive on package travel, package holidays and package tours meant. If we could address what European directives are doing and the way in which they are interpreted, that would help the industry’s problems enormously. On the continent, our European colleagues take the directive, put it on the statute book and then ignore it. Such a light approach to EU directives would be most helpful for many of our British businesses.
Lorely Burt (Solihull) (LD): I have followed the hon. Gentleman’s most interesting speech with great care. Does he not agree that it is the job of our civil servants to decipher what he describes as gobbledegook and put it into plain simple language so that British companies can understand what is required of them with the minimum difficulty?
Mr. Bone: Of course, that is entirely correct. Unfortunately, they are not allowed to. That is the point. One cannot change an EU directive. It might say that there needs to be a penalty for this or that, but that one could not do something else, either. The three provisions might not tie up, but we could do nothing to change that. My hon. Friend the Member for Stone (Mr. Cash) made this point earlier. We are not just banging on about Europe. British businesses have genuine concerns. Although Government regulations tend to be very clear, as they have gone through the process of scrutiny in the House and the Joint Committee on Statutory Instruments, the numerous European regulations cause the greatest concerns.
The impact assessment said that the change would in no way help competition. I do not understand why, if we are trying to improve regulation, competition will not be improved for businesses. The Minister for Employment Relations and Postal Affairs said earlier that he could not say how many fewer prosecutions there would be, yet the impact assessment states that there will be 22,500 fewer. When he sums up, will the Under-Secretary address that clear confusion? Such a reduction in prosecutions would, of course, be welcome.
My final point, which goes to the heart of the issue, concerns the effect on small businesses. We know that 99 per cent. of enterprises are small, that 47 per cent. of enterprises employ 36 per cent. of the total work force—or rather, they employ a higher percentage of the total work force and account for 36 per cent. of all turnover. It is small businesses that encounter the problems with regulation and its interpretation.
I accept that the Minister comes to this subject with a genuine desire to reduce regulation, but unfortunately the Government are creating something that will make it very easy to impose fines without reducing regulation or the need to interpret it. I see this as an empire-building process, and I am concerned that the office will go down the route of the fictitious department of administrative affairs.
2.26 pm
Mr. Graham Stuart (Beverley and Holderness) (Con): It is a pleasure to follow that experienced business man, my hon. Friend the Member for Wellingborough (Mr. Bone) and my hon. Friend the Member for The Wrekin (Mark Pritchard), as well as my hon. Friend the Member for Huntingdon (Mr. Djanogly), who spoke from the Front Bench. It is noticeable that only Conservative Back Benchers are speaking in today’s debate. I hope that the historic commitment of the Conservative party to small business in particular and business in general, as the generators of wealth on which our public services depend, is reflected not only in this debate but in a forthcoming change of Government.
It is good to see the Minister for Employment Relations and Postal Affairs back in his seat. If the Bill succeeds, I hope that he will be as successful in eliminating unnecessary regulation as he has been in eliminating so many post offices. The Bill represents the third time in six years that the Government have attempted to reduce the burden of regulation. I welcome any opportunity to discuss the burden of regulation—a burden that, according to the British Chambers of Commerce, has cost business £66.99 billion since the Labour Government came to power.
The Government have proved unable to put the brakes on the proliferation of unnecessary regulation and the Bill is an admission of that. After two failed attempts to legislate to cut the number of regulations, we now have a Bill aimed only at curbing the activities of over-zealous men with clipboards. Gone is the promise to cut regulations.
If one needed evidence of the fact that if there is a simple way to do something the Government will find an ineffective and needlessly bureaucratic way to do it, one need only look at their ham-fisted attempt to kick their habit of over-regulation. The Government began with a flourish in 1997 by abolishing the Deregulation Task Force and replacing it with the Better Regulation Task Force. That did not mean that the job of deregulation was considered complete.
In its 2001 Manifesto, Labour pledged to “cut red tape”. Later that year, the Government introduced the Regulatory Reform Act 2001, which produced just 27 deregulations in four years. Does the Minister accept the British Chambers of Commerce’s findings that in the same period 600 new regulations were created?
In April 2007, the right hon. Member for North-West Durham (Hilary Armstrong) said that it was not possible to calculate how many regulations had been repealed in each year since 1997. The effect, it appears, was too small for Ministers to measure. Whatever the exact number of new regulations heaped on business, it is clear that the Government did not regard the 2001 Act as a complete success. It was intended to provide
“a major tool for this and future governments to reform entire regulatory regimes and to tackle unnecessary, overlapping, over-complex and over-burdensome regulation”.
Regulatory reform orders were introduced as the legislative vehicle for amending primary legislation without the need for a Bill. By the end of 2006, 34 RROs had been introduced. In 2001, 63 deregulatory opportunities had been identified, and the Cabinet Office said that the overall outcome was disappointing—a great bureaucratic word.
The 2001 initiative was reviewed by the Cabinet Office in 2005, and it concluded that the Act had simply not been implemented. When businesses listen to Ministers’ fine words today, they will be forgiven for wondering whether they will be translated into effective action to reduce unnecessary burdens.
The Government decided to try again, and hailed 2006 as the “year of delivery”. We were presented with the Legislative and Regulatory Reform Bill—another Government attempt to regulate their way out of regulation. The Minister who opened the debate today said at the time that the Bill would
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