Select Committee on Regulatory Reform Minutes of Evidence

Examination of Witnesses (Questions 100-120)


29 APRIL 2008

  Q100  John Hemming: You are implying in that that the BRE should set up a forum for them to discuss regulatory practice.

  Mr Cullum: There is an opportunity. There is an undoubted need for it and the BRE you would think were a fantastically well-placed organisation to do it. Some of this is about trying almost to apply the principles of better regulation to the process of better regulation and the BRE, in the sense that we would argue that a lot of better regulation is about culture change, that it is not just about compliance and being heavy-handed—what I believe the Financial Services Authority used to refer to as "Nike regulation" when you say to people, "Just do it." How do you get beyond that and achieve culture change? Rather than the BRE just using tools which are sometimes a bit tick-boxy or about quantity rather than quality, trying to reinvent the relationship with regulators, so that it is more discursive, more about ideas exchange, and more about culture change within regulation.

  Q101  John Hemming: One of my hobby horses is taxman regulation processes. One of the particular things is that if somebody's annual return for tax credits gets lost in the post and therefore they do not get it in time, they have to pay back all their tax credits, which is an odd regulatory decision. Do you think HMRC should fall within the BRE's remit? Presumably your employees have encounters HMRC quite a few times.

  Ms Veale: Indeed they do. I would have thought there was a very strong argument for that. It has a particular role which we are interested in, in enforcement of the national minimum wage, of course. It seems quite strange that it is detached. It is not something we have given a great deal of thought to, but now you have put it to me I would think there was a huge, impelling logic to having it.

  Mr Cullum: I am not sure how it works but I know they have their own in-house better regulator arrangements, in that they have Teresa Graham, a former Better Regulation Commission colleague, as an in-house better regulation scrutineer. She is a forthright, intelligent person, who I am sure does a good job in challenging them, but it does seem an odd omission. Certainly from the consumer and citizen side, it is a very obvious area of regulatory burden. For us, a large part of this story is trying to minimise the number of organisations who say, "Our role as a regulator is so different from everybody else's that we are not going to play" because a lot of the themes are common

  Q102  Dr Naysmith: I have a couple of questions on the health and safety and employment regulation and its interaction with other regulation. Is the BRE working well with regulators such as the Health and Safety Executive to produce more effective and risk-based regulation in this area?

  Ms Veale: I think that has been a success story. It is not finished: there is a lot more to do. People are particularly—and quite rightly—very sensitive about health and safety legislation and regulation, because of the important role it plays in protecting lives, apart from anything else. Certainly that is one of the very positive impressions I have picked up, that there is a lot of work going on together with both the organisations. I think it has been quite a sea change, for the Health and Safety Commission. It is a fairly long-lived and highly respected organisation that had its own culture that went along with it. I think there is a particular feeling with health and safety regulation that you have to be terribly careful before you change anything. From what I have heard from trade union commissioners on the Health and Safety Commission they have taken this issue extremely seriously and are doing it very methodically and doing it in a way that will not frighten the horses because they take quite a scientific evidential approach—which is good. We would not want to rush them. As far as I can gather the BRE is working within that culture.

  Q103  Dr Naysmith: They claim they have halved the number of forms that employers need to fill in. Is that your experience?

  Ms Veale: Yes—which is very good. Form-filling has its place and I know that it is necessary afterwards if you end up in court, but there must be much easier ways of doing things. It is easier for trade union officers, much easier for safety officers, if the systems they have to comply with are much easier to use and make the most of modern information technology.

  Q104  Dr Naysmith: Do you think it has made any difference to compliance, either better compliance or less compliance?

  Ms Veale: I do not think that has really been properly measured. We are not hearing anything negative, so from that I suppose you could draw the inference that it is not causing problems. Whether it is making things better, I think we would have to wait a little bit longer to assess properly. I would not say there has been any significant problems with it—which is a good start.

  Q105  Dr Naysmith: You have already mentioned the reviews that are taking place in health and safety and employment regulations, particularly in the area of dispute regulation. Do you have any specific suggestions about what improvements are required here?

  Ms Veale: I think less of it, really. The TUC has firmly come to the conclusion that you cannot codify relations between employers and employees. It is just not possible to do it. It is about human relationships. The clearest example of why you cannot do that is the dispute resolution regulations. They were highly well intentioned: the idea was to make sure that all employers had procedures before they dismissed and that employees had a grievance procedure they could use, but it very quickly became obvious that if you start trying to write out a script for how people will deal with each other it is never going to work in a lot of situations. People became obsessed with the script and how they did things, rather than the substance of the problem. There were not fewer cases going to tribunal; there were the same number of cases—in fact the number of cases went up—but the cases related to the procedures rather than to the substantive complaint. That is very frustrating for both parties. It is quite clear that those regulations had not worked at all and I would salute the courage of the Government for having admitted that something was not working and listening to the different voices and making all those changes. You do, then, have to have the very difficult task of substituting for that, because, if you have accepted that the intention was good and that there was a need to improve procedures, you then have to work out how you are going to do it without prescriptive statutory regulation. Again, things are developing and developing in a very positive way, and far more use is being made of the ACAS code, which does have legal status, in that it can be used in a tribunal proceeding, but you do not sit there in your place of work making sure that every line of the ACAS code has been complied with, because it is not that kind of instrument. What is happening now is far more of a prompt system, with rewards and penalties for transgressing and doing things well. If you do make a mistake, you are going to get the book thrown at you in a tribunal and you are going to get money added to the amount you are going to have to pay out to the employee; but on the other hand, if you have done things well and there is a minor problem, the tribunal will be given the freedom to take a very, very light touch approach and just give the employer a bit of a telling off—which is quite right. I think that gets things back to how things should be. I would just chuck in one more comment because I cannot resist it: employers, understandably, complain about the volume of employment litigation now on all sorts of issues—and I think that is partly why the new dispute resolution regulations were put in place, because of course in the old days, when I started out, things were regulated voluntarily between unions and employers far more extensively—and I am not here to give lectures on policy, but I would say that if you remove that form of regulation—and I know it had its warts and there were problems with it, but if it disappears completely, as it has done now in some workplaces—something will go in to substitute for it, unless you move to a society that has no employment protection at all, which none of us would want to have. If you are going to have some employment protection, there has to be some means of enforcement; if you are not going to allow that kind of workplace enforcement, I cannot see that there is any alternative to having litigation. Our plea to the BRE on that would be to throw away the political baggage and have a look again at the tool kit and what could be done in terms of making things better at work and getting the parties to do things between themselves.

  Q106  Dr Naysmith: How would you make that come about? What would you suggest?

  Ms Veale: I would do some pilots. I would create some opportunities where you can test that—hopefully not to destruction—and where you can see whether there is a way of doing things through those means which achieves the same end. You would not be able to suspend protection; you would have to create a situation somehow where you can get to the same place by a different route and to see whether that would deliver the same result. You would have to keep the protection there, because obviously you cannot strip away bits of employment protection.

  Q107  Dr Naysmith: Do you know of employers who would be happy to join those pilots?

  Ms Veale: I think we could find some good employers who we work well with who would be happy to demonstrate by example how you can do things much better on a collaborative basis. If that were to work, you could then see if you could spread that out into other parts of the economy. These days it would not necessarily be with unions but with some sort of mechanism that replicates that employee voice, employee buy-in. We are all really trying to get to the same place at the same time.

  Q108  Chairman: Perhaps employers should throw away their lawyer's phone number and get a book on common sense.

  Ms Veale: I entirely agree.

  Q109  John Hemming: I would like to come in on that particular point. There was a Middlesbrough case—and you will know better than me—where employees sued the union for settling something that was not their best interest, which destroyed the concept of collective bargaining. I believe that went to the Court of Appeal and was changed in the Court of Appeal. It does raise an interesting point—and I still employ about 130 people, so I am still quite a big employer; although, to be fair, my staff are not unionised: it is a software house and you negotiate with individuals to a great extent—whether it is worthwhile using works councils/trades unions as a mechanism to get a bit of equality of power, basically, between the employer and the employee because it is unequal relationship by default, dependent on complex factors, and whether that is an area to be looked at from a regulatory point of view. There is no question about it, for a lot of the legal processes there is a merit in having no-win, no-fee lawyers around: they are not going to take cases that are absolutely futile, there are issues about costs, but I do think, yes, there is something to be looked at, and I would be interested in expanding on that idea of alternatives to litigation for protecting individuals in the workplace and whether you have got other thoughts around that. You said not necessarily for trades unions.

  Ms Veale: Because they are not there. I would love to set up a national trade union system where everyone had a trade union in their workplace. We are not going to get that and they would not be independent.

  Q110  John Hemming: You are thinking of works councils.

  Ms Veale: Exactly, where you had some sort of representative fora for employee voice and you had a kind of deal, so that, if what is being done is generally going in the right direction and is for the greater good of the greater number, you would never be able to stop individuals having a right but you would have to hedge that about a lot more. With Middlesborough and other cases, the lawyers have worked out that not only can they make money out of suing employers but they can sue the organisations that do deals with them. That will completely undermine any remaining collective bargaining in the private sector, and in the public sector it is having a massively damaging effect.

  Q111  John Hemming: Your argument is that there would be some merit in perhaps limiting legal immunity to representative groups who are doing that negotiation, so they are not vulnerable to being got at all the time.

  Ms Veale: If that were possible. There are complications with EU law, as we are finding out. The Equal Treatment Directive specifically includes trade unions, so it would be very difficult to get an opt-out, but I am sure there is some way of nuancing it so that you had some sort of time lags built in. That is what we are trying to look at at the moment, so that nobody loses their right but the way in which the right is accessed is—

  Q112  John Hemming: A lot of the time it is the parameters within which you can take litigation. If it is a very broad parameter, then it is not so much of a problem.

  Ms Veale: Yes.

  Q113  John Hemming: If it is very narrow and precise, the costs of that have a big impact.

  Ms Veale: Exactly.

  Q114  John Hemming: It is an interesting topic. I am also involved in the management of Birmingham City Council, and the single status pay and grading review. Obviously the difficulty with the trades unions is you cannot negotiate with the trades unions and agree something if they will get sued by their members as a result of them agreeing something—which does not create a very good negotiating environment. What are your views on the Regulatory Enforcement and Sanctions Bill?

  Ms Veale: It is not something to which we have paid a huge amount of attention. We had some sympathy with some of the points the local authorities were making about the local better regulation offices, but our main concern was to ensure that the Hampton Review and those aspects of enforcement it instigated were properly interpreted into the law. So far, we are reasonably satisfied with the outcome. We have not been actively lobbying on the Bill, which I think you can take as being a sign of general approbation, but I suspect the NCC know an awful lot more about this than we do.

  Mr Brooker: The NCC is actively lobbying on the Bill. We certainly welcome the aims, which are to improve consistency in the way that consumer protection is enforced locally and to modernise the sanctioning tool kit. We are concerned at the way the Bill was presented by the minister—as I touched on earlier. Consumers were very much treated as an afterthought in legislation rather than putting them right at the heart of it. To be fair, the Bill, now it is more or less through the Lords, is in a much better state than it was when it started. The Government have made a couple of concessions; in particular, excluded from the primary authority principle occasions when there is significant risk of serious harm to human health or the financial interests of consumers. But we do have concerns on remaining points; in particular, there is a pre-emptive right for business to appeal a proposed enforcement action, even if the enforcing authority and the primary authority are in agreement with what should happen next, and we think there is scope there for well-heeled businesses to use lawyers to delay legitimate enforcement action or even to deter hard-pressed local authorities from taking action in the first place, so that is an area that we want to remove from the Bill.

  Q115  Judy Mallaber: Sarah, you have criticised business and employers for often not distinguishing between policy and administrative costs when they have made complaints. You have suggested that that attitude is also seeping into government decision-making. Can you expand on that and give some examples?

  Ms Veale: The classic example, which is in our evidence, is maternity legislation. It has not been changed radically but extended, so that women have a longer period of paid maternity leave. The problem with the business lobbying on that, which I think the BRE did absorb, is that there was, I think, quite a naked attempt to conflate the administrative issues with policy objections. I think that really what the businesses were objecting to was extending the period of paid maternity leave. They said that this made additional administrative burdens and they could not cope, as if it was much more difficult to let a women have nine months' paid leave than to let a woman have six months' paid leave, whereas, in fact, I would have thought the exercise of providing cover, statutory maternity pay and so on would not have been any more difficult between six and nine months. I think it would be much better if there were to be some honest debates about policy—and we are perfectly happy to engage in debates about policy all day and every day—but to pretend that the objections were to do with the costs of running something I think are disingenuous. There is a lot of help given, especially to small firms, in dealing with maternity absences. I really feel the two things were blurred in together. The trouble is, if the voice is loud enough on those sorts of issues and manages to create a storm of upset about administrative burdens, the temptation then for organisations like the BRE is to accept the evidence they are given without looking behind it. If you go and talk to some small business owners, you will find that it comes out in a rather ugly way, as have some of these recent comments made by some quite senior—

  Q116  Judy Mallaber: Alan Sugar.

  Ms Veale: Quite. I was not going to name him, because he is getting too much publicity already, but comments have been made that there is no point in employing women of childbearing age because they are only going to cause you loads and loads of problems. That is detestable, in my view. On the other hand, at least this a view put forward about not wanting to employ people who are going to cause a nuisance in the workplace and not seeing employers having a role in contributing towards ensuring that women who have babies can go back to their jobs and all the rest of it. It beggars belief to try to pretend that this is not policy objection and it beggars belief to argue—like the small firms do to try to get it considered respectable—not by saying what Alan Sugar says but by saying, "It is all just too difficult. If you make it easier then it will all be all right and we will not object" but they never say how they would make it easier. You cannot have the objection to the administrative burden and not provide some sort of solution—unless the truth is that you object to the policy and you are not interested in the solution because you just want the Government to stop doing it. I think it is using the burdens argument as a disguised way of arguing for a different policy. I think that is disingenuous and I worry that the BRE make it into that sort of mindset. I would urge it to do its job of dissecting information and sending people out there to talk to one or two real, small businesses, instead of always listening to the voice of representative so-called organisations which, sometimes, I think, are a bit lazy themselves perhaps in collecting real hard evidence and extrapolating from that proper arguments about how you would do things better.

  Q117  Judy Mallaber: Is it always clear what the difference is between the administrative cost or burden and the policy? I was at a small business breakfast recently and maternity rights was one of the big things raised by them. When I tried to pin down one of them, the concern they expressed was not knowing when the person was going to return to work: if only they had clarity at the beginning and it was set out at the beginning rather than the employee being able to say, "Not long before she came back," that would ease the burden. Is that a burden or is it a policy issue? Is it always clear or is there sometimes a blurring between the two?

  Ms Veale: I think there is probably more of a genuine blurring there, but there is nothing that can be done about that because human nature is human nature, things take their course, and it is practically possible for women to predict precisely when they would like to return to work. I think the Government have done what they can, with gentle measures like the "keeping in touch" phase, which is an excellent initiative whereby the employer can now feel confident that they can talk to the woman whilst she is off and not get into trouble for it, and make sure that they have conversations regularly, so that there is a better ability to plan when the person is coming back. But I think that is an inevitable consequence of a lot of women now working -which has generally been extremely good for the economy. Leading employers would say that through employing women—who are outperforming boys a lot now at universities and schools—they are ensuring that they have absolute access to a pool of talent without which I do not think they would survive, but have to accept biology, which is that women still do have the babies and will need some time off work. Again, I think you get into much more complex arguments about how far employers have to shoulder social burdens, but employers operate in the community and they have to accept that this is what is happening today: you cannot turn the clock back. They just need to ensure that they do ask, and they should ask volubly, for as much help as they can get with managing the situation—that is perfectly legitimate—but stop wrapping up arguments objecting to the fact that women are working—which some of them still do object to—in bogus arguments about how difficult it all is.

  Q118  Judy Mallaber: Is there evidence that the confusion between policy and administrative costs or burdens is affecting how government looks at these issues and government policy?

  Ms Veale: It is hard to see exactly where that is happening. One good example of it would be the way in which the Working Time Regulations operate. There has been so much fuss made about all the difficulties in giving people their holidays and their rights to time off, that what has happened in fact is that it has done businesses more harm than good because they have now constructed a raft of regulations that are practically impenetrable in order to protect employers from these administrative burdens. In a way they have created more burdens by trying to avoid the burden of doing what the policy objective was. On that, you feel like saying, "The policy is to give people a decent holiday and to make sure they are not working excessive hours for the good of them, the company, and everyone else. The easiest way to go about that is to negotiate it in each workplace." It really is, because then you get something that fits the purpose, fits the requirements of that particular workplace and gives the basic protection, instead of having this great wad of regulation, which is really where the problem is. That is an example of where you have substituted an attempt to compensate for administrative difficulties with good policy objectives that could be sorted out in a completely different way.

  Mr Cullum: I suppose part of the problem is that if you wrongly categorise what is an administrative burden from the start and then say you need to cut the number of administrative burdens by 25%, you are making life difficult for yourself if some of them are not real administrative burdens and are going to be impossible on a policy basis to remove. I have not looked at the BERR list of administrative burdens for a while, but when I last looked at it there seemed to be quite a few which were about providing consumers and, indeed, employees, with information. There is an administrative process associated with that, but that is not administrative burden in the sense that that programme was designed to identify. Things like giving consumers a copy of a contract which they have signed, on a policy basis seem highly appropriate. Okay, there is an administrative task associated with it but, in a regulatory sense, the administrative burden would be if you then had to post a copy to John Hutton—because that is the bit which is not about policy, it is about unnecessary intervention which requires you to do something which is separate and pointless. If you create a list which has lots of fake administrative burdens and then say you must cut them, you make it much harder to achieve the quantity requirements which are there. I guess there is a question then: Does it push you to make some of the wrong decisions in order to get your administrative burdens score up?

  Q119  Judy Mallaber: Does the BRE distinguish between tasks and burdens?

  Ms Veale: I suspect, exactly as Philip says—and you could become quite cynical about this—if you are given an objective to reduce something and make it far less onerous, if the way it has been introduced has added all sorts of reporting requirements that you are not quite sure about but which you tucked in for various reasons, that would make the task in reduction subsequently much easier. I am not quite sure. Am I misunderstanding you, Philip?

  Mr Cullum: If I think everybody knows who is involved in this that the administrative burden exercise is flawed, it is trying to do the right thing, which is it is trying to get to some sort of process which will drive culture change by creating a bit of imperative into why they must try to remove some bits of regulation. But I remember speaking to people involved in regulation within government two or three years ago and saying, "There are all sorts of flaws in what is administrative and what is an administrative burden," and being told, "We know this is flawed, but, hey, that is history, the process is going, it is just a question of getting on with it." It could be the time is right for a bit of a review as to how effective that process has been.

  Q120  Chairman: That is very helpful. Certainly I think the Committee would welcome any further observations you might like to submit on that particular point because it does help to quantify the scale of the task facing the BRE if some of the so-called burdens should not be included in that list. Perhaps I could thank both the NCC and the TUC for giving evidence today. I would invite you, before we formally close, if you have anything else you think you would like to add, now is your chance.

  Mr Cullum: Perhaps I could pick up on something Sarah said which I thought was terribly interesting—it was the slightly throwaway remark about the importance of pilots. Sometimes regulators take what I think of as the Heathrow Terminal 5 approach to introducing things: they just do it en masse and see whether it works, but there are some examples of things being piloted quite effective. In one of the examples which we are very supportive of is the Food Standards Agency scores-on-the-doors approach. It is all about environmental health, information in the windows of restaurants and pubs that serve food, and about inspection. It is a fantastic way of conveying information very clearly to consumers. There was a big debate about the most effective way of presenting the information and the solution was to trial a number of different options, which they have now narrowed down to two they are consulting on with a view to implementing one at the end of the year. That felt like quite an effective approach and yet it is not really something which regulators in general tend to do at the moment. I think the tendency is to desperately seek a solution to something or seize on what they perceive to be the solution and then say, "That's it, we are going to go for it," and there is something about trialling it which should be better. I thought that was a very good point.

  Ms Veale: It was not supposed to be a throwaway point. It is a serious point. We are all for pilots: testing things out before you run them out, to use that awful jargon, would be a very good thing.

  Dr Naysmith: It could be usefully used by some government departments introducing policies as well.

  Chairman: On that point, thank you very much for your time.

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