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21 May 2008 : Column 354

However, the reality turned out somewhat different from the grand ambitions expressed by the Minister that day. By the end of 2007, with the Legislative and Regulatory Reform Act 2006 having been in force for a full year, the Financial Times reported that it had still to cut or even amend a single regulation. According to the Better Regulation Task Force, the Government’s own quango on regulations, the annual burden of regulation on UK business is £100 billion, or 8 per cent. of our gross domestic product. It should be noted that a British Chambers of Commerce study found that that figure was “suspiciously rounded”, and probably too low. I hope that the Minister responding to the debate will answer those charges.

No one can say definitively what benefits the UK taxpayer gets from restricting business in this heavy-handed way. The Competition Commission does not know the impact of regulation on innovation, competition, competitiveness or productivity. We do know that at least 14 new regulations are introduced every day under this Government. Businesses tell us that, if there is one thing that annoys them as much as regulation, it is chopping and changing. When he sums up, will the Minister offer some assurances that this Bill will get things right this time? Could it be third time lucky for us, or does he intend to continue to attempt to regulate his way out of trouble? Can we expect to see the same Ministers who are presenting this Bill today suffering the humiliation of returning with yet more legislation before the Government come to their sad end in a couple of years?

Mr. Bone: Or sooner.

Mr. Stuart: Or sooner, as my hon. Friend says.

I am supportive of the stated aims of this Bill. Proportionate regulation is to be welcomed. I remain to be convinced that the Bill, as drafted, will meet its own aims.

The Bill’s aims have their genesis in the Hampton and Macrory reviews. Hampton, for example, found that the diffuse structure of local authority regulatory enforcement increases uncertainty and administrative burdens for business. Few could argue with that.

I should like to take a few minutes to look in detail at the Bill and its flaws. The Hampton review found that unco-ordinated action means that businesses receive unnecessary inspections and conflicting advice, while a lack of communication between local authorities results in a duplication of effort. Part 1 intends to address those problems by establishing a local better regulation office with the objective, to paraphrase the explanatory notes, of ensuring that local authorities exercise their relevant functions in a manner that is effective and efficient and complies with the Better Regulation Commission’s principles of good regulation. Those principles are that regulatory activities should be exercised in a way that is transparent, accountable, proportionate and consistent, and that they should be targeted only at cases in which action is needed. In short, the LBRO is to be a “regulator’s regulator”.


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All too often regulations are enforced in a way that shows no regard for the risk. Not unfairly, trading standards, environmental health and licensing inspectors are regarded as inconsistent and over-zealous. Anything that we can do to change that should be welcomed.

I shall not bore hon. Members with the tedium of the fine detail of the workings of the LBRO. My colleagues in the Lords have done sterling work in securing amendments that will help its operation, but neither they nor I—nor indeed the Minister—can ignore the fact that the establishment and operation of the LBRO seems a hideously complex way of improving the way local authorities regulate. If local inspectors are the problem, is not the answer to reform the rules that they are enforcing and then retrain and manage them to achieve improved outcomes?

As the Minister said, the LBRO will be a small organisation taking on the clout of over 500 big regulators spread across the country. However laudable its aims, we must question its ability to take on the might of those who like to overuse the few powers in life that they enjoy.

Part 2 attempts to introduce a degree of competition between local authorities in the enforcement of regulations. Any regulated person who carries out an activity in the area of two or more local authorities will be able to nominate which body regulates him, and that body will then be that person’s primary authority. That will mean, for example, that such a person need not be subject to enforcement from more than one trading standards authority. One might think that that is fair enough. I recognise that differing interpretations of the same regulations create a major additional burden for businesses. Indeed, I should like to know whether the Minister’s Department has measured the cost of that burden.

If this Bill is passed, Labour-controlled councils might find themselves doing a lot less regulatory work. Just as voters did at the start of the month, the chief executives of big firms will vote with their feet and opt to be governed by Conservative councils that have an understanding of business. That is all very well for big businesses that will be in a position to do that. Indeed, it is to be welcomed. Consistently enforced regulations mean less uncertainty and a reduced regulatory burden, but what about the small shops—“Hutton’s Haberdashery” or “John’s Jewellers”? They will be stuck with the same old regulators and, in Labour areas, all too often the same old over-regulation.

Equally, there is considerable potential for consumer confusion. As my hon. Friend the Member for Huntingdon noted, if a complaint is made against a store in, say, Barrow and Furness that has chosen to be regulated by a different local authority, to whom do consumers complain, and how can they be sure their complaint will be pursued? I shall be interested to hear about that from the Minister who sums up the debate.

My fear is that part 2 will help bigger businesses while making no difference to small shops and punishing consumers, but I also have another concern about it. The decision to allow primary authorities to charge for their services will not play well with
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businesses that already pay for enforcement services through their local rates. Businesses using the primary authority system will be subjected to what is essentially a regime of double taxation.

The Macrory review made recommendations aimed at ensuring that regulators have access to a flexible set of sanctioning tools that are consistent with the risk-based approach to enforcement outlined in the Hampton review. Many regulators are heavily reliant on criminal prosecution as the main sanction, but the Bill provides for civil monetary penalties. Let us be clear: we are talking about a system of fines that can be imposed without recourse to the courts.

I do not oppose civil penalties, but I feel that we need to review the extent to which they should be restricted. As drafted, this Bill contains no such restriction, and a total of 27 designated regulators will have the relevant powers. The Minister who opened the debate unfairly compared the subjective assessments made by Companies House of how a business is run with the instant fines introduced by the previous Conservative Government for people who do not achieve the clearly objective and easily measurable task of submitting their accounts on time. I hope that the Minister who winds up the debate will say how much leeway the Public Bill Committee will have to restrict those powers and give businesses, especially small ones, some reassurance.

As Lord Lyell of Markyate stated on Third Reading in the other place, the provision in effect gives the regulators the power to be

He has much more legal standing and experience than either I or the Minister, and we should take his words seriously. Earlier, we considered the fact that the right of appeal does not negate the basic accusation made against the new system. The British Retail Consortium says:

That point was made earlier. Wide powers relating to a long list of offences are being granted to a large number of unaccountable regulators; that combination could be disproportionate and unnecessary.

I support the stated aims of the Bill, but it does not come close to meeting those aims. The LBRO—the regulator’s regulator—is small and weak. All the signs are that it will be ineffectual. The provision for primary authorities may help bigger businesses that trade across the country, but it will not help small shops or, crucially, the consumer. Instead, it will lead to consumer confusion.

The Bill attempts to force regulators to enforce regulations in a more measured way, but the civil sanctions section of the Bill will help to foster a traffic warden culture across 27 regulators. Inspectors are elevated to the status of judge and jury. The Government continue to heap regulatory burdens on business. The regulatory impact assessment for the Pensions Bill estimates that the cost of regulation stemming from that Bill alone will exceed £230 million. What estimate has the Minister made of the total cost
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of regulations associated with the Bills set out by the Prime Minister in the draft Queen’s Speech?

Just six months before he became a GOAT, or member of the Government of all the talents, the Minister for Trade Promotion and Investment, Digby Jones, told The Daily Telegraph:

The Bill does nothing to change the proliferation of regulations that stifle business. How many more botched regulation-related Bills can we expect from the Government before we get real change?

2.41 pm

Charles Hendry (Wealden) (Con): This has been a significant but relatively brief debate on an important piece of the Government’s legislative agenda. Indeed, the legislation is perhaps the most important Bill for business this Session. However, I think that business representatives watching the debate will be disappointed when they see how few Members of Parliament have turned out to participate in it. They recognise that regulation is one of the most important issues affecting the success of their companies and of UK plc, and they will simply not understand why hon. Members have chosen not to be here to speak up in the interests of businesses in their constituencies. It is important to send the message that the debate deserved better attention.

As many hon. Members have said, it sounds as though the Bill is a step in the right direction, but as we have heard, the Government’s track record on regulation is so bad that we have to be sceptical about their intentions. The fundamental issue when it comes to regulation is that the Government simply cannot stop meddling. They believe that they know how to run every business better than the business man, every school better than the head teacher, every doctor’s practice better than the doctor, and every voluntary organisation better than the people who have run it for years. They simply cannot keep their hands off. They feel that they need to get involved because they alone have the unique skills necessary to make things run efficiently.

The Government always talk about better regulation when they should be talking about less regulation or deregulation. The belief that regulation and interfering are important runs right the way through the Government, but that is not the right way to go. It was notable that when the Department for Education and Skills, as it then was, issued guidance to schools on how to tackle bureaucracy, the document ran to two volumes, because the Department could not make it clear in one volume. As we have heard from the British Chambers of Commerce, we get 14 new regulations a day from the Government—that is £66 billion in extra costs to business. We heard that HSBC, one of the biggest banks in the world, has to face 370 regulatory bodies around the world. We live in an incredibly regulatory environment.

It is right to ask:


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Those are not my words, but those of Sir Digby Jones, spoken when he was director general of the CBI. He is now better known to us as Digby the Baron Jones of Birmingham. We always thought that that was the correct form of address for a dowager duchess, but that is how he wishes to be known. He highlighted the issue of regulation before he came to Parliament to sit in the other place. It is of little surprise, therefore, that he is not the Minister taking the Bill through its stages in the other place. I think that he would have found it hard to resist saying that we are over-regulated and need to do more about it.

The Minister talked in enthusiastic terms about the work that the Government have been doing on deregulation, but why are all the representations that we receive from business and other organisations about the pressures that they face as a result of regulation, and the fact that they are regulated too much? Why are we told that the average cost to UK business of implementing new legislation is £133,340 a year? Why does the Federation of Small Businesses tell us that the average small business spends seven hours a week complying with red tape and on paperwork? Why does British Chambers of Commerce estimate that by the time Ministers have taken directives through the system to make them apply to UK law, the cost is increased threefold?

There is too much regulation. The approach identified in the Bill begins to scratch the surface, but it does not address the underlying problem. As we heard from my hon. Friend the Member for Huntingdon (Mr. Djanogly), in four years, only 63 measures were identified under the regulatory reform orders, although the orders were to be the Government’s vehicle for addressing the problem. Only 27 of those 63 have actually been dealt with.

Business in this country faces competition as never before. There was a nice, convenient thought that China would pose a threat to us only on the cheap, dirty side of manufacturing—that was never the way in which we saw manufacturing, but that was the perception. Nobody truly realised China’s ambition to do high-value, high-end work, too. Business was initially attracted overseas by low labour costs. Now, it will go overseas to pursue cheap energy. A key factor in determining whether businesses decide to stay in this country or move overseas is the regulatory environment.

It is a matter of profound concern that companies such as Shire—one of the biggest pharmaceutical companies—are looking to move offshore. WWP is, I think, the biggest advertising and marketing agency in the world; it, too, is moving offshore, and others are talking about doing so. They think that what was special about Britain is being lost, and that other countries offer a more attractive environment in which to do business. What they need from the Government is work done to tackle skills issues, so that the graduates and school leavers who come through the system have the skills that the companies need.

Businesses need tax rates to be addressed, too. In Prime Minister’s Question Time, it was disturbing to hear the Prime Minister criticise us for saying that corporation tax needs to be dealt with. He said that that was the wrong sort of problem to raise. Above all, there is the issue of regulation to be addressed. Every
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single business that we visit in our constituencies tells us that it is over-regulated, and that it is wrong.

We have heard some expert and well-qualified speeches. It is notable that we five Conservative Members who have spoken have all run our own businesses. We have gone through the pain; we know what it is like when a person sets up a business and feels that the world is against them, even though their motivation for going into business was that they had an idea and wanted to provide a service to the community or a business audience. They end up feeling like some sort of criminal if they do not get their VAT form in bang on time. The approach towards business does so much to stifle it. Many people would never have started their own business if they had known how difficult it would be.

My hon. Friend the Member for The Wrekin (Mark Pritchard) is right to tell us that regulation is not bad per se. Many regulations are good for business and for Britain. The problem is identifying and removing the ones that are not good and are counter-productive. He was right to say that we need to know the answer to the question of how many businesses have closed as a result of bad regulation.

My hon. Friend the Member for Wellingborough (Mr. Bone) said that he was rejected by the electorate on a number of occasions. That rejection meant that by the time he entered the House, he was a more expert, well-qualified MP than he would otherwise have been. We are lucky that he is here to bring that expertise to the House and to our considerations today. He talked about the sense of frustration that business has about bad regulation, and he did so with immense feeling and understanding, because he has been there himself, and has run businesses for 20 years.

My hon. Friend the Member for Beverley and Holderness (Mr. Stuart) rightly sounded sceptical about parts of the Bill; again, he has experienced the consequences of over-regulation first hand. He asked a whole range of sensible, practical questions—so much so that they almost amounted to a request to go on the Committee for the Bill. We will need such detailed analysis as the Bill goes through its stages.

My hon. Friend the Member for Stone (Mr. Cash), whom I am glad to see in his place, talked about the relationship with the European Communities Act 1972. Ministers talk about leading the way in cutting down administrative burdens, but one of the greatest frustrations for business is that a small directive from Brussels ends up as a long regulation that comes out of a Department.

If we want to tackle the culture of over-regulation, we need to start with Ministers. They need to say what European regulations and directives say and that they will not add anything to them. If that does not stand up, it will be the failing of the directive. We should not use directives as an opportunity to gold-plate and add on bits and pieces to allow officials, whom I know are well meaning, to tag on a little bit that they have been tucking away in a drawer, hoping for a suitable directive that they can latch it on to. Ministers have to be robust in rejecting that approach and saying that the directives that come from Brussels should be exactly that, and not become a vehicle into which more bits are added.


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