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Baroness Scotland of Asthal: My Lords, again, I hear what the noble Lord says. I also hesitate before saying that the insurance companies should get some good lawyers. To the best of my knowledge and belief, there is no improper inhibition employed in relation to insurance companies doing that which they need to do
to ensure that fraud is not perpetrated. Fraud generally is taken very seriously by this Government. An intergovernmental working group including representatives from the Home Office, SFO, the police, LSLO, CPS, FSA, DTI and HMT are currently working to consider means of improving the response to fraud. They are doing very good work.
Lord Phillips of Sudbury: My Lords, in answering the question of my noble friend Lord Bradshaw, the noble Baroness did not refer to the last point he made regarding contingency fees. Will she comment upon the propensity of contingency fees, or conditional fees, to lead to a greater degree of unscrupulousness on the part of the tiny minority of the legal profession who are so inclined?
Baroness Scotland of Asthal: My Lords, we certainly have no evidence to suggest that conditional fees have increased the preponderance of fraudulent behaviour as the noble Lord suggests. They have indeed increased access to justice because individuals who could not afford to litigate privately despite having good cause now can. Public funds have been focused on other priorities where the market cannot yet provide. It is in a solicitor's interests to ensure that bad cases are not brought before the courts and are weeded out of the system. It is right to remind noble Lords that fraud within the legal profession, particularly in the branch of the profession in which the noble Lord, Lord Phillips, is involved, is perpetrated by a tiny minority. I believe that the figure is less than 0.22 per cent. Therefore, the majority of lawyers uphold the integrity of their profession with great aplomb.
Lord Campbell of Alloway: My Lords, is not the Question, frankly, wholly misconceived? What on earth are Her Majesty's Government supposed to do about the fraudulent claim in Manchester? It has nothing to do with Her Majesty's Government. Good heavens, insurance companies make inquiries as a matter of course that indicate where there is a propensity for a bogus claim. I simply do not understand the purpose of the Question other than to have a "dig" at certain lawyers.
Baroness Scotland of Asthal: My Lords, I share the perplexity of the noble Lord, Lord Campbell of Alloway. I am pleased to agree with him that the subject matter of the Question has nothing to do with Her Majesty's Government.
Lord Ackner: My Lords, conditional fees have a lot to do with Her Majesty's Government. Is not the real problem with the conditional fee that you have a situation in which the lawyer has a direct interest in the outcome of cases? That is why in the past conditional fees were considered contrary to the public interest.
Baroness Scotland of Asthal: My Lords, the comments of the noble and learned Lord in regard to conditional fees constitute an argument that has been advanced for some time. We have looked carefully to determine whether there is any evidence base to support that argument and whether the assertion of the noble and learned Lord is correct. However, we have no information to indicate that that is the position at the moment. If and when we do have such evidence, we shall take it extremely seriously and shall address the matter speedily.
Business
3.13 p.m.
Lord Grocott: My Lords, with the leave of the House, two Statements will be repeated this afternoon. The first will be on Bali and the ISC report, to be repeated by my noble friend Lady Amos; and the second will be on new NHS resources, to be repeated by my noble friend Lord Hunt of Kings Heath. For the convenience of the House, it is planned that the Statements will be taken after the first debate.
Business of the House: Standing Order 41
Lord Williams of Mostyn: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That Standing Order 41 (Arrangement of the Order Paper) be dispensed with on 7th January next to allow the Motion standing in the name of the Baroness Scotland of Asthal to be taken before the Motion standing in the name of the Lord Grenfell.—(Lord Williams of Mostyn.)
On Question, Motion agreed to.
Administration and Works: Select Committee
The Chairman of Committees (Lord Brabazon of Tara): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That the Lord Shaw of Northstead be appointed a member of the Select Committee.—(The Chairman of Committees.)
On Question, Motion agreed to.
Statutory Instruments: Joint Committee
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the Lord Mancroft be appointed a member of the Joint Committee in the place of the Lord Vivian.—(The Chairman of Committees.)
On Question, Motion agreed to.
Government
3.15 p.m.
Lord Peyton of Yeovil rose to call attention to the growth of government and its attendant regulations and the case for action to reduce them; and to move for Papers.
The noble Lord said: My Lords, I start by saying a few words more about Parliament than about the Motion. I believe that Parliament, like other of our institutions, needs to be seen, heard and respected. If little or nothing of what is said or done here is reported, Parliament unventilated will perish for lack of fresh air. People will not care for an institution of which they know nothing and Parliament will lose confidence in its ability to perform its main task of controlling the executive. It will also cease to attract people of merit.
Governments will see no need to defer to such an enfeebled institution. They might then find it easy and convenient to tackle what they see as the nuisance of a free press. If the press should lose that freedom, it seems to me that it will have itself to blame in large measure for having allowed—if not actually pushed—an institution devoted to freedom to fall into obscurity where it can be neither seen nor heard. I make no apology for saying that because it seems to me that Parliament is in some jeopardy as so many of its procedures are totally ignored by those who think of nothing but football, money and sex.
I turn now to the Motion. I should like to share with your Lordships some of my thoughts in moving it. Government is much too large, such that as a whole and as individual departments it has become virtually unmanageable. The number of Ministers in government today serve only to increase the frictions that are part and parcel of every government's experience. Government makes too many rules and is devoted to short-term considerations. Its principal skill is in presentation and promising, not performing. The new-speak language that it employs—I shall go into that later—is extremely confusing.
I have made some sort of superficial study—it can hardly be anything else—of a volume entitled the Civil Service Year Book. It can be seen in the Library and it can be obtained from the Printed Paper Office. It is a chart of government as it exists today. A very brief editorial goes out of its way to call attention to the Office of the Deputy Prime Minister which, it says,
- "becomes one of the largest departments"
I shall return to that matter later. It is interesting to note that the year book is accompanied by a compact disc and a guide which mean very little to me. One can place it in one's pocket but it would be very difficult to get it into one's mind.
We then read a foreword from no less a person than the Cabinet Secretary. I was rather surprised to find him lending himself to the newspeak and saying that,
over the years of his appointment, his aim will be to give front-line delivery to education, health, law and order, transport and the many public services which we tend to take for granted. I thought that delivery was something done by midwives, messengers and bowlers on the cricket field. I have not yet got used to the idea of Ministers delivering these items as if they were packages. I believe they would do well to change their language.The size of government is a subject too large to be covered in a short debate such as this. We need time to dwell on it and on the huge volume of which it consists. I can refer briefly only to one or two departments. I turn immediately to the Office of the Deputy Prime Minister. I cannot think that anyone since Hercules has ever tackled such huge tasks. But, of course, Hercules had the benefit of being successful in his impossible labours. That has yet to be proved so far as concerns the Deputy Prime Minister.
To call it an "office" when it is really a substantial empire is to do violence to language. I do not believe that any office can be large enough to hold the Deputy Prime Minister. His empire is covered by no fewer than 120 columns in the Civil Service Year Book. It has eight Ministers and 10 directorates. I have no time to go into what all those directorates do, but I cannot help feeling that there are rather too many of them and I wonder whether the people in them spend a great deal of their time fighting over boundaries.
I have brought with me some quotations from the Year Book with which I want to weary your Lordships. At column 208 of this memorable book, it is stated that one of the purposes of the Office of the Deputy Prime Minister is to:
- "Improve delivery and value for money of local services by: introducing comprehensive performance assessments and action plans, and securing a progressive improvement in authorities' scores".
I turn to another part of his empire. It is entitled the "Democracy and Local Leadership Division". It sponsors the institution of modern, democratic local government. From what I hear, it has caused a good deal of confusion in the ranks of local government. But this Democracy and Local Leadership Division has a subsidiary entitled the "Local Democratic Renewal Branch". Its task is to modernise,
- "local governance and democracy in England, including new council constitutions, elected mayors, the conduct of local authority business (not Councillors' Code of Conduct—see Branch D), the role of the councillor, and councillors' allowances",
That is a huge function. I wonder why central government are taking it upon themselves to interfere so minutely in local government. Personally I recall that the government I used to support, at least in name, did a great deal of harm to local government in that they filleted it. At one time—it shows how wrong one
can be—I thought that the present administration would show more respect for local government than they do.I want to mention one more organisation—the Social Exclusion Unit—for which the Deputy Prime Minister is responsible. I shall weary your Lordships with one more quotation because it is something of a gem:
- "The Social Exclusion Unit remit is to help improve government action to reduce social exclusion by producing"—
- "'joined-up solutions to joined-up problems'".
I have little time to dwell on individual Ministries but surely the DTI deserves a comment. It has 70 to 80 columns in the Year Book and seven Ministers. It claims to work closely with almost everyone in driving up innovation and productivity. How grateful industry must be! I have never heard any industrialist express either gratitude or admiration; nor have I ever heard it explained what the DTI has achieved, if anything, over the years.
I turn briefly to the subject of health. I want to express my admiration for, and gratitude to, the noble Lord, Lord Hunt, who listens to what is said in your Lordships' Chamber. However, I still find it difficult to extract any information about what is happening. I refer to an institution called RAFT, which is the heir to the organisation established during the war by McIndoe at East Grinstead for burned fighter pilots. That institution has been in jeopardy for some years. It has been threatened. It is said to be moving from Mount Vernon to Northwick Park, but no one knows when it will go and no one seems to bother about the continued uncertainty. In my view, that is a scandal.
I do not have time to deal with the question of transport, although I am glad to note that the pie-in-the-sky idea of a co-ordinated, integrated system of transport was recently put quietly on one side. However, I cannot resist the temptation to say that the situation in the capital city, where we live, is simply disgraceful. I know that the Mayor is doing his best to increase congestion, and he is being very successful in that. But the Government are standing back with folded arms and doing absolutely nothing to remedy a situation of increasing hardship and loss.
I was going to talk about the Department for Culture, Media and Sport but I must refrain. I end by saying that all the people about whom I have spoken have power but they never have enough. They are always looking for more. Last year there were 4,642 new sets of rules. I have commented on the language used by those in government but, if I had the right to counsel a government, I would say, "Be a little more modest both in your aims and in what you say you have achieved". That might impress people more favourably.
I have a last piece of advice: I would so much like Ministers to spend time reading a book published in the 1970s written by Dr Schumacher, entitled, Small is Beautiful. They might pay attention not only to the title but to its contents. I shall give one brief quotation:
- "Man is far too clever to be able to survive without wisdom".
3.30 p.m.
Lord Lang of Monkton: My Lords, it is a pleasure to rise in succession to my noble friend Lord Peyton of Yeovil, and to compliment him on the clarity with which he laid out the case for his Motion. It was a shrewd choice of subject, concerned with the growth of numbers in and burdens of government. It is illustrative not just of the Government's tendency to interfere, regulate and impose burdens; it also exposes the parallels that can be drawn with the major government areas of taxation, spending and borrowing that are now also growing and inflicting so much harm on our national well-being.
The combined burden on enterprise is now beginning to become unbearable. A concise example of the growth of government might easily be given by looking across the Border to Scotland. What used to be done by five government Ministers is now done by 22. What used to be done by some 70 Members of Parliament is now done by around 200. In addition, there has been the concomitant increase in civil servants. It might be argued that part of that is the creation of a separate government and that in the view of some there is an overwhelming imperative to create that additional separate government. But it is illustrative of the broader problem that we face in looking at growing government and growing burdens.
In the past year, 4,642 new sets of regulations were introduced; an increase of 50 per cent on five years ago. The British Chambers of Commerce, whose members have to struggle with those regulations, estimated that in 2000 the additional cost to business was some £10 billion. Now, just two years later, they estimate the cost at £15 billion.
To all the regulations is added the burden of endless government task forces and Tsars for this and Tsars for that. As someone once said, the Government have more Tsars than the Romanovs. They have even set up a task force to try to achieve better regulation, forgetting that the creation of all the other task forces has caused part of the problem. The Government's response to criticism of the excessive burden of task forces is to offer a red tape day on which all new employment regulations would come in on one day instead of being scattered throughout the year. A better solution would be to introduce fewer regulations, to reduce the number of Bills they bring before both Houses and to insert in as many of them as possible sunset clauses to reduce the cumulative burden of legislation.
A good example of the increased regulation and the burdens that that creates is something which happened immediately after this Government came to power in
1997. They threw away one of the great achievements of the previous government when the then Prime Minister, John Major, secured in the Maastricht Treaty negotiations an opt-out from the Social Chapter. The incoming government had a different set of priorities, and they were entitled to assert those. But I think that they should have weighed more carefully the downside to the changes they wanted to make, which would throw open the floodgates and cause the inflow of new regulation from the European Union to damage our more flexible and more competitive work forces with endless directives and red tape.I refer, for instance, to the Information and Consultation Directive; the part-time workers regulations, which in two years is estimated to have cost over £300 million; the contract workers regulations; and the temporary agencies workers directive. In the United Kingdom there are some 700,000 agency temps, something like 65 per cent of the whole of the European Union sector. That, therefore, impacts much more heavily on this country than elsewhere. There was then the Working Time Directive, which in four years is believed to have cost over £7.5 billion to industry.
I am sure that some of those directives were worthwhile or had worthwhile components, and desirable ones at that. But collectively and cumulatively they are doing massive damage. With their surrender to the European Union on those issues, the Government have now thrown away the discretion to choose which to bring in; which to adapt to suit our circumstances and which to ignore. Elsewhere there seems to be an insensitivity to the economic consequences and a woeful lack of restraint in bringing in such regulation.
The lack of restraint at a time of obvious economic uncertainty and a compulsion to over-govern, which I believe my noble friend illustrated, led government spending plans to increase from £418 billion this year to £511 billion by 2005–06. Now it is absorbing almost 42 per cent of our national income; a rise of 2 per cent in a year, despite tax revenues having risen by no less than 42 per cent. In addition, tax changes will have risen by £47 billion by 2005. Again, burden is piled upon burden.
With borrowing we see the same rake's progress. We see borrowing in the public sector forecast last April at £11 billion for this year now forecast at £20 billion, and for next year at £24 billion. An overall budget surplus forecast of £3 billion is now to be a deficit of £6 billion, with a further £5 billion next year. I predict it will be much more; it always is. It is no wonder therefore that, overall, employment is now falling across the board. In the manufacturing sector alone, 400,000 jobs have been lost since 1997. The combination of the burdens of regulation, taxation and the other constraints imposed on enterprise have contributed to this result. GDP in the production industries is down by 5 per cent. Confidence is falling. Investment has been falling for two years. Inward investment is being frightened away.
Growth forecasts for the whole economy have belatedly had to be revised downwards by the Chancellor. Productivity growth has crashed in the past year. Again, that is a direct consequence of the mass of new regulations that so undermines our competitiveness. Corporate tax revenues, which were to rise by 15 per cent, have fallen by 14 per cent. We now have the worst trade deficit since records began.
Cause and effect are interlinked here. It is the worst time to have burgeoning government; over-regulating government; and over-spending government burdening business with regulation and financial penalty. The cost of it all to business, the public services and the economy is in turn reducing their capacity to deliver and so undermining the credibility of the Government's whole approach and making the problems worse. It is no wonder that the savings ratio has fallen from 10 per cent when the present Government came to power to the all-time low of 3.75 per cent now projected. Only the paper-thin confidence of high consumer spending sustained by dangerous levels of personal borrowing is keeping the economy from collapse.
Some of the statistics with which I have burdened your Lordships—I apologise for including so many in a relatively short speech—are in part the predictable consequence of the state of the world economy. But that should have led the Government to pause and adapt their behaviour. Many of the consequences that I have spelt out and many of the statistics that I have given, are the result of self-inflicted wounds. Against the background I have described, the extravagant growth of government, their numbers, aspirations, spending, taxing, borrowing, interference and the burden of their red tape and regulations are destroying both our prosperity and our prospects. I believe that it is time to call a halt.
3.38 p.m.
Lord Vinson: My Lords, it is a great privilege to follow the two previous speakers on this neglected but important subject. I recall reading when I was younger Gulliver's Travels. Your Lordships need no reminding that that was an allegory by Jonathan Swift on the regulations of the time, largely religious, but in the same vein as today. He said of Gulliver that:
- "No single silken thread held him down but 1,000 made him immobile".
My own background is that of an entrepreneur who started a small business and built it up, probably blissfully unaware of the problems that I should hit. In those days—40 or 50 years ago—the regulatory atmosphere was so much more benign and kind and, some would say, more unsafe, but at least it meant that entrepreneurs did not have to struggle with the huge burden of regulation that they have to struggle with
today. As a result, I am sure that we are inhibiting and handicapping the growth of many of the firms that would give this country prosperity tomorrow.Perhaps I can give two small examples as illustrations. The building trade is conditioned and governed by building regulations. These are, if one puts them all together, inches and feet—20 or 30 centimetres, if one likes—thick. I came across a typical example of this last week. My daughter is buying a house. I said to the builder: "Why is there no doorstep?" He said: "We are not allowed to put one in because wheeled invalid carriages of various kinds could not easily cross the threshold." I said: "Surely, a doorstep could be at least an inch high?" "No, it is not allowed."—he said—"But as a consequence, I cannot guarantee that when it rains heavily the water will not come under the door. What is even more important is that the frame of the door is now permanently sunk in a damp condition and will rot and will have to be replaced in 20 years". So in order to meet the relatively minor problem of enabling a disabled person to cross that threshold more easily, we cannot have a doorstep even an inch high. The unintended consequence of that ludicrous piece of legislative interference with builders' and architects' freedom to act will be one of enormous cost in the future as every one of those door frames will have to be replaced.
The other day I received a cri de coeur from an architect about new windows that he was anxious to install into an Edwardian house and was prevented from so doing by a building regulation. The explanatory note—not even a regulation itself—states:
- "A new regulation 16A makes special provision for building work consisting of the installation of replacement windows, rooflights, roof windows and doors in existing buildings. It authorises a local authority to accept, as evidence that the work complies with regulations 4 and 7, a certificate to that effect by a person registered under the Fenestration Self-Assessment Scheme. Regulation 16A also provides for the notification of the completion of work where no certificate is to be given (regulation 2(4).
- "Regulation 3 contains a transitional provision".
The long and short of that is that the cartel set up by the Fenestration group now has a total monopoly on the installation of windows. I am sure that that was an unintended consequence of the regulation.
A very well known and respected architect wrote to me:
- "It is such a joy to get in touch with you. It is good to know that the fears of those of us who still labour at the sharp end are not totally ignored at the top. Thank you for that. But I have to say that the resentments of the ordinary Englishman are now starting to form a critical mass at this level. I do sincerely believe that politicians continue to despise us, or I would say ignore us, at their peril".
Many of our regulatory bodies, I believe, pursue their own agenda, often regardless of the wider public considerations. It is time to ask the ancient Roman question: "who will judge the judges"?
I give the example of the work of the Food Standards Agency. It has just issued a recommendation to the EEC that sausage skins made from sheep should be banned. The background to that is that it is afraid that sausage skins might contain BSE. Even though we have all been eating sausage skins since the height of the BSE epidemic, it is now getting worried about it.
Sheep were last fed with contaminated meat and bone meal in 1988. Not a single case of BSE has been found in sheep, although scientists are hunting hard to find it. There cannot be a sheep alive that has been fed with those contaminating substances. But the Food Standards Agency in its wisdom decided to hold a stakeholder meeting to endorse its officers' recommendation for a ban. That meeting was held in Belfast, which is very difficult for English people to get to in a hurry from the mainland. It comprised 88 people, a bit of a circus really; 49 of the 88—over half—were staff or directors of the FSA. The others were invited guests from various bodies.
In practice, the Food Standards Agency has to take its decisions behind closed doors and then conducts, using its own officers, the stakeholder meetings in a manner to achieve the ends it needs. It argues that its decisions are based on the precautionary principle. In effect, that enables it to abandon the concept of risk assessment and balanced judgment based on proportionality.
Proportion is so much harder to justify than precaution. The avoidance of risk means that no decision has to be justified and that the decision itself is hard to criticise, because who is brave enough to challenge publicly the concept of putting safety above all else?
Thus, the precautionary principle stifles rational scientific debate regarding the nature of risk and is often nothing more than a cloak for intellectual cowardice.
One has to consider seriously whether the Food Standards Agency's stakeholder meetings are a sensible forum for taking decisions. They certainly appear to be little more than a mechanism for giving the FSA a veneer of public approval to its decisions. They certainly give little confidence to those of us who believe that the FSA's decisions should be taken on hard-tested scientific analysis after in-depth discussions with those with knowledge of the industries concerned. That is a perfect example of a body that does not seem to take its decisions in the wider context but is blindly pursuing its own agenda.
If time permitted, I could give umpteem other examples to the House of the problems of unintended consequences.
Noble Lords will remember Lyme Regis and the deaths caused by canoes capsizing. As a consequence, regulation was introduced that covered both trips abroad and canoeing generally. A report in The Times of 4th July 2001 stated:
- "Commercial companies are now required to hold a licence under the Adventure Activities Licensing Scheme before they sell climbing, trekking, caving or watersports activities to schools or other groups of young people aged under 18.
- "The Education Department insists that local authorities must obtain a licence for schools to take children on trips. The Adventure Activities Licensing Authority inspects the safety mechanisms of applicants and considers whether to grant or refuse a licence . . . Head teachers are expected to hold detailed briefings in school for parents who have to agree in writing to allow their children to join the trip".
- "There will be no adult or family swimming at Glendale this year. The requirement for a qualified lifeguard to be on duty at all times makes the provision of swimming at present impossible".
The outcome of all this overregulation and its unintended consequences is the headline,
- "Children becoming softies as red tape halts adventure",
Is this really the kind of world that we want to see and is this really the consequence of trying to make a supersafe society that we desire?
My time is up. I could continue to illustrate this issue in umpteen ways, but I shall merely try to be constructive and ask: what can we do about it? We must bring back some proportionality into the application of regulation; we must bring back sunset clauses, as mentioned by the previous speaker; we must give more power to the better regulation unit or the task force, or whatever it is called today; and we need more pre-legislative scrutiny.
Unless we do so, I am afraid that we shall wake up to find that the road to national decline is paved with well-intentioned regulations.
3.49 p.m.
Baroness Flather: My Lords, our society is complex and becoming more so. We all understand the need for regulation in such a society. Those of us who are reaching a certain age know that regulations have continued to grow to keep pace with the complexities. Currently, however, one feels that every day one comes up against something or other, small or big, that somehow impinges on one's everyday life. When everyday life begins to feel difficult in terms of what one can and cannot do, it is important for us to stop and ask whether things have gone too far.
For example, I do not know whether any of your Lordships have tried to give away anything recently. One may have an electrical appliance, a television set, perhaps, that is working perfectly. If one wants to change that television for a bigger one, it is impossible to give away the old one. One cannot give away a fridge; one cannot give away anything to anybody. One is stuck. It is not allowed: everything has to have a certificate. If one wants to give a mattress to someone who does not have one, one cannot. One may not be certain it ever had that little fireproofing label. And one needs to know when and where one bought it.
I read somewhere recently that specialist doctors say that they used to spend eight minutes with each patient and that now they spend five minutes. What do they do with the rest of the time? I do not need to spell it out: they have more forms to fill, more records to keep and more things to do.
My daughter-in-law decided that, as she has two young children, she would like to be a playgroup leader. She took a course, did extremely well and earned distinctions. She worked as a playgroup leader but lasted only one year. She was extremely good, but she could not find the extra day and a half, unpaid, to complete all the records. Children between the ages of three and five have to be assessed every week. Each child's record must be kept. Most playgroups run only from 9 o'clock until 12 o'clock. It is impossible for people who run playgroups to keep such records in the time available.
It is becoming difficult for people in caring professions to do their job, which is to give care. They spend a huge amount of time filling in forms, keeping records and making sure that they have met every regulation. There is so much centralisation that we have to ask ourselves whether we have got the happy medium between a regulated society and a totally controlled society. As my noble friend Lord Vinson said, regulations are supposed to be for our own good. They are supposed to protect us. But has anyone done a proper evaluation of all those regulations to establish whether we are safer and better off? Or is it simply a cost implication for everyone involved? I do not believe that a proper evaluation has been done.
We have a plethora of directives from Brussels, as noble Lords have said. Yes, we have to bring those directives into our legislation, but we do have some flexibility as to how that is done and to what extent. It feels as if we are already part of a federal Europe—a united states of Europe. Every time a directive comes up, we wholeheartedly take it in and push it through. Have we looked at our partners in Europe to see how much regulation they put into practice and how much they follow it? I shall not pursue that topic; it is for another occasion. The point is that we should spend more time considering our situation and seeing how directives could be modified to fit in with our needs.
If we go down this road continuously, we shall have a nation of form-fillers and buck-passers, as my noble friend Lord Vinson said. We shall not have intelligent, thinking, flexible or imaginative people. We are trying to educate our nation into being much more responsive to situations and ideas. If all ideas and spheres of life are going to be regulated, we are not going to produce people of that sort.
In the Government's first term of office, nearly all the legislation that passed through your Lordships' House was administrative in nature. There was little that changed anything. It is important for us to start thinking about what kind of country we are building. I am not making a political point here; I have made no political point. I have spoken very much from the
heart, as I always do. I hope that the Minister will take that into account and at least give an assessment of what is in place.Let us consider the situation in education, where there is such a burden on teachers, and in the health service. Those two matters are dear to the Government's heart. However, they are being drowned in all kinds of red tape and regulations. We need to see whether education and health have improved in any way since all the regulations were introduced. If the answer is a resounding "Yes", tell us, because we will accept that. It is not at the moment obvious to any of us.
3.57 p.m.
Lord Garel-Jones: My Lords, this is an important subject, and noble Lords are grateful to my noble friend Lord Peyton for introducing it. As with so many things in life, regulation is a question of balance, or "proportionality", as my noble friend Lord Vinson said. It is naive to think that life would be better if all regulations were swept away. No one would seriously argue that the state does not have a duty to concern itself about food hygiene, the environment and so on. Equally, however, my noble friend Lord Hurd, speaking in the context of EU regulation, coined the felicitous phrase, "an invasion into the nooks and crannies of our daily lives".
The figure given by my noble friend Lord Lang of, I believe, 4,642 new sets of regulations, represents a 50 per cent increase on the number introduced in 1997. That leads me, at any rate, to believe that the nooks and crannies are in danger of being swept completely clean. No one who listened to the opening speech of my noble friend Lord Peyton could fail to believe that the Government are in serious danger of losing all sense of balance and proportionality in this matter.
I shall focus my remarks on the effect of excessive regulation in the City of London. The Wicks group identified four broad criteria that should govern our approach to regulation. First, practitioners, not legislators, create a functioning market. Not affording them the flexibility that they require to innovate will serve only to damage markets. Secondly, good regulation and good legislation can be ensured only through consultation with practitioners at all stages of the process. Thirdly, regulation must be risk-based, taking into account the different risks faced by different firms, customers, investors and counter-parties. Finally, enforcement of legislation and regulations is vital but requires constant monitoring at domestic and European levels.
Within those four guidelines, to which I wholly subscribe, I shall make five quick points establishing that the danger of over-regulation can damage the City of London. First, at the level of the European Union, regulation of the financial services sector is clearly necessary, but only in so far as it contributes towards creating a healthy and unified trading environment. There is a culture in the United Kingdom—my noble friend Lady Flather referred to it—of blind compliance with legislation from Brussels. In my day,
we used to call it gold plating the legislation. The result is that directives are often implemented in the United Kingdom in an excessively legalistic fashion without accounting for the differences between markets and—again, my noble friend Lady Flather referred to this—the way in which other member states choose to implement such measures. That frequently leads to a relatively higher compliance burden in the United Kingdom than in other EU countries.Secondly, there is a prevailing attitude among regulatory authorities that all forms of commercial risk should be covered. An overcautious approach ignores the requirement on firms to employ risk as a tool for innovation and competition. Stifling those elements damages the competitiveness of the entire sector.
Thirdly, regulatory cost is a huge issue, particularly under current market conditions. Declining volumes of business increase the potential for default. However, increasing the regulatory cost is the wrong approach to mitigate that. Although the FSA is required to undertake a cost/benefit analysis before adopting new rules, the analysis is generally cursory and always concludes that the benefit of new rules outweighs the cost.
Fourthly, firms and regulators are in clear agreement that the trend towards regulatory harmonisation is beneficial. Regulators often fail to see the need, even within this climate of harmonisation, for differentiated treatment of product lines and firms, such as SMEs. There is insufficient differentiation between types of market user and investor and differing levels of protection, which each may need. That is a particular feature of the European approach.
Finally, regulators may be at risk of overburdening themselves. Already, momentum exists to widen the scope of the financial services legislation to encompass a number of wholesale markets, for example, that of power. The inclusion of non-financial institutions and product ranges, under the umbrella of the FSA, will create the risk of their becoming overstretched and losing focus on the retail investor.
Initially, the concept of prudential regulation was designed to prevent retail customers losing money to unscrupulous investment firms. However, that initial "public good" objective has somehow been replaced by a massive compliance burden, which has not served and is not serving to fulfil the initial and wholly laudable objectives. What is required now is that authorities refocus their attention on the core principles of consumer protection rather than seek to broaden their scope.
4.4 p.m.
Lord Plumb: My Lords, I hope that noble Lords will forgive me for intervening; if the noble Lord, Lord McNally, agrees, I shall say a few words during the gap, having missed getting my name on the Speakers' List yesterday.
It is always a great pleasure to follow a Motion moved by my noble friend Lord Peyton. It is appropriate to debate this Motion because every
person in the land is concerned with the effect of regulations on their individuality and in relation to various sectors, not least in relation to agriculture, to which I shall refer.
- "regulation has to be proportionate and efficiently implemented and the likely benefit should be identified and if possible quantified".
Society will always have a keen interest in the operations of farmers and the food industry. Food safety will naturally be a high priority. But concerns about environmental impacts and animal welfare lag not far behind. Moreover, farmers and growers are subject to the same regulatory framework as the rest of the UK industry in their role as businesspeople and employers. Given the resultant substantial and cumulative impact of regulations on farmers, it is essential that the impact of each is kept to the minimum.
I ask the Minister to acknowledge that regulations must be kept under regular review. It appears that regulations are often applied to regulations, which causes conflict. I had six farmers—good people and good businessmen—around a table fairly recently and I asked them for their opinion on how four sets of regulations should be applied. I received six different answers from people who understand the issues; their interpretations were very different.
If a regulation has been introduced on the basis of a precautionary principle, the necessary work has to be commissioned to improve the decision-makers' knowledge base and we should review the regulation as soon as new information is available. Often, the cost of regulations that are imposed on other sectors is transmitted by economic force to farmers, growers and the whole agricultural industry. A clear example of that is the meat hygiene directive, which is complex to say the least. In that, farmers have to be involved in discussions about how to reduce the impact of the regulations, together with the directly affected sectors.
These are important matters—there are many others—and they show how regulations affect people, particularly those who are hard at work, who farm as individuals and who have no labour support. They have to deal with these bureaucratic regulations when they have finished their day's work.
4.9 p.m.
Lord McNally: My Lords, we all welcome the fact that the noble Lords, Lord Garel-Jones and Lord Plumb, who have expertise in this area, have taken the opportunity to point out the problems and dangers of over-regulation.
I have with me an excellent paper by the Liberal Democrat shadow spokesman, Dr Vincent Cable, entitled Unnecessary Regulation. I recommend it to all members of the Government. However, my one fear was that the debate would be just a catalogue of complaints and horror stories about bureaucracy and government interference. The debate has not taken that line, thanks to the way in which the noble Lord, Lord Peyton, introduced it. He brought a philosophical approach to the debate. That is something that I must confess that I have not always associated with him; I had rather thought of him as a kind of Dickensian character—a man who went home at the weekend to shoot pheasants, or peasants, as the mood took him.
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