Regulatory Authorities (Level of Charges) Bill
(Limited Text - Ministerial Extracts only)
Read Full debate11:39 - The House divided: - Ayes: 6 / Noes: 38 - Question accordingly negatived.
Mr Christopher Chope (Christchurch) (Con)
I beg to move, That the Bill be now read a Second time.
This is a short Bill but an important one because it raises an issue that affects everyone in the country: the level of regulatory charges imposed on them. I think it was the Minister for the Cabinet Office and Paymaster General who coined the phrase “stealth taxes”. He did so more than 10 years ago, but it is still a highly relevant term, because when public sector organisations increase their fees and charges, they are essentially imposing additional taxes on the populace.
While I was looking into possible subjects on which to introduce Bills during this Session, I had some very unsatisfactory correspondence with the Care Quality Commission about the price it was charging for the registration of a children’s hospice in Dorset called Julia’s House. At that stage, Julia’s House had three residents rooms but it wanted to add a further room, and the CQC said it would have to pay a substantial additional fee of thousands of pounds. The hospice chairman wrote to me saying he thought that was unsatisfactory as the hospice is, after all, a charity and all its costs are covered by charitable donations, which in this instance were, effectively, going into the proxy coffers of the Government by way of a regulatory burden.
Following that, the CQC conducted a consultation on its level of charges in general. I will refer later to some of the conclusions to be drawn from that, but it is clear that the CQC is intent on increasing the burden of charges well above the rate of inflation from year to year, partly to meet the Treasury requirement that it should cover its costs by raising charges. We know, however, that it is possible for organisations to reduce their costs, although that option is very often not taken by regulatory authorities. Fortunately, the BBC is now being forced to reduce its costs because the Government have said the licence fee cannot be increased.
The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)
I wonder whether my hon. Friend might dwell a little further on this point and give us a little more detail because, contrary to what he has said, there are cases in which the introduction of a moderate and measured regulation may allow for other regulations to be lifted. That balance lies at the heart of the Bill and our consideration of it.
Mr Hayes
Yes I will, as I want to inform my hon. Friend’s contribution as well as I possibly can. There is a strong argument that the introduction of professional standards, and therefore some measure of quality, into certain parts of the economy may allow for the reduction of other regulations that are currently in place precisely because those professional standards are absent.
Mr Chope
That is a rather general example, if I may say so. Perhaps when my hon. Friend comes to respond to the debate he will address a specific profession, such as dentistry. Dentists are already regulated by their professional body. They are also regulated under health and safety legislation and so forth, but the CQC is now insisting that it too should regulate them. It is going to cost dentists a minimum of £800 a year, I think, to register with the CQC. I hope that the Minister will in due course explain what added value will come from that, as there is an enormous amount of scepticism about whether it will lead to any improvement in the quality of dentistry in this country. When one looks at the CQC report, one finds that the income from the regulatory fees for dentists will far exceed the amount that will be spent on regulating dentists. That is a good example of what I am describing as a “stealth tax” or an “additional regulatory burden”.
Mr Chope
I think that that would be a danger were the increase in fees to go ahead. A similar danger arises in the case of 17-year-olds seeking their first provisional driving licence. Is it reasonable that they should have to pay a very large fee for that? That fee might be a deterrent to their getting a licence and they might choose—unlawfully, obviously—to drive without a licence. That was a challenge I faced when I was the Minister for Roads and Traffic because in order to keep down the cost of entry into driving for someone obtaining a provisional licence and in order to make ends meet, it was necessary to introduce a modest charge for people who wanted to renew their licence at the age of 70.
There was a big debate in the Government at the time, egged on by a false leader in The Sunday Telegraph, and the proposal to charge a modest fee for 70-year-olds when they renewed their licences was regarded as a tax on pensioners. Nobody really understood the point that my hon. Friend the Member for Bury North (Mr Nuttall) is making, which is that to increase the costs for the person seeking to get his first provisional licence would be a potential deterrent for that person. I have raised a similar issue in the context of the very high rates of insurance costs and the Government’s policy of having increases in insurance premium tax that bear directly and disproportionately on the costs for young drivers who want insurance. My hon. Friend therefore makes some very good points.
A constant problem is: if we have regulators, who will regulate them? That is essentially what the Bill is about. It challenges the Government in a time when money is tight and when we are told that family incomes will fall over the next two or three years. The Government are imposing quite tight targets on many Government Departments, but would it be fair if those Departments responded by increasing the fees and charges they impose on the tax-paying public by more than the rate of inflation? I do not think it would.
Mr Hayes
I am interested in that assertion. Of course my hon. Friend will know that the Government are sympathetic to the thrust of what he is saying. We understand that regulation is a significant issue for businesses of all types, but I wonder whether the debate about regulation is too often seen in quantitative rather than qualitative terms. My hon. Friend has made a case about the volume of legislation in respect of regulation and I wonder whether he could expand on the quality issue. When regulation is justified, how should it be devised and implemented?
Mr Chope
My Bill deals with the cost of regulation rather than the wider issues of regulation that have been raised in, for example, Lord Young’s report. I have a number of other Bills before the House that cover various aspects of Lord Young’s recommendations.
My concern is that it is too easy for the regulatory authorities to say that they have to increase their charges because they have to carry out more activities. That is what they do. My hon. Friend will know this better than anybody, because he probably has the coalition’s programme for government on his bedside table, but that document talks about reducing the burden of regulation:
“We will cut red tape by introducing a ‘one-in, one-out’ rule whereby no new regulation is brought in without other regulation being cut by a greater amount”
and:
“We will end the culture of ‘tick-box’ regulation, and instead target inspections on high-risk organisations through co-regulation and improving professional standards.”
I am unsure how what the Care Quality Commission has done to dentists fits in with the second paragraph on business in “The Coalition: our programme for government”. Perhaps all will be revealed when my hon. Friend the Minister responds to the debate.
Mr Speaker
Order. I am grateful. No debate would be complete without the legendary literary references of the hon. Member for South Holland and The Deepings (Mr Hayes), but I know that the hon. Member for Christchurch (Mr Chope) will not be tempted away from the path of virtue, whatever the enticements of the Minister.
The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)
It is a pleasure to speak about the Bill promoted by my hon. Friend the Member for Christchurch (Mr Chope), who spoke with his usual clarity and consistency about the burden on business. He takes the view, which the Government broadly share, that it is crucial that business is free from all regulation but that which is necessary for it to go about its purpose. In a free economy, businesses must be allowed to do what is in their commercial interest and the wider public interest without unnecessary interference from Government. That is a fundamental aspect of what my hon. Friend advocated. It is at the heart of the Bill, and he will be pleased and perhaps even relieved to know that it is also at the heart of the Government’s thinking.
The Bill highlights some important ways in which regulation is enforced in this country. I made the point when I intervened on my hon. Friend that our attitude and approach to regulation need to be qualified by considerations of both quantity and quality. It is true that the Bill deals with cost, but cost has a direct relationship with both of those. It is certainly true that we should measure the volume of regulation quantitatively, and I shall speak at length—but not at undue length—about some of the ways in which that is already done by Government and others. However, it is also true that we should assess regulation qualitatively, because the quality of regulation has a direct bearing on its cost to Government and to the organisations that it affects. The Bill is both a quantitative and a qualitative assessment of regulation measured by cost.
For reasons that will become clearer later in my speech, I cannot support the specific approach that the Bill takes to regulatory change, notwithstanding the warm welcome that I have given to my hon. Friend’s commitment and the opportunity that the Bill gives to consider these matters in greater detail. I shall speak about the matters that it raises in considerable detail as we engage in this interesting debate.
The Bill provides an important reminder of the many ways in which regulation can impact on business and the best means of ensuring that adverse consequences are minimised. It would be helpful to consider some of the principal aims of the Bill. In a rather abbreviated contribution by his usual standards, my hon. Friend took us through the Bill, but I shall do so in more detail. First, the Bill seeks to limit the ability of regulators to recover the costs of the regulatory services they provide. Specifically, the Bill seeks to limit increases in charges to no more than the rate of inflation as measured against the consumer prices index.
My hon. Friend may feel that this is a rather technical point, but these are, after all, technical matters: many examples given in his speech would probably not be covered by the Bill as drafted. He said with typical humility when he was coming to the end of his peroration that he understood that, if the Government supported the broad thrust of the measure, it might be necessary to perfect its drafting, so I acknowledge that he anticipated that some of these technical problems might arise, as they often do when Bills are introduced through the method of a private Member elevating a matter for the consideration of the House and asking for the Government to respond.
I make that technical point because in existing regulatory law the definition is largely restricted to business regulation. Therefore, some of the matters with which my hon. Friend dealt—passports, for example, drivers licences and vehicle licensing—would not necessarily be covered, because those are matters affecting the private citizen. They are subject to the usual rules on public expenditure, managing public money and the normal oversight of spending. That is probably the most appropriate set of frameworks by which they should be assessed. On a purely technical note, therefore, it would be inappropriate to relate the detail of the Bill to the advocacy of my hon. Friend in the areas that I highlighted.
Mr Chope
My hon. Friend suggests that the Bill applies only to regulatory authorities that regulate the carrying on of any business. As he knows, it also covers regulatory authorities regulating the carrying on of any activity. Why does he think the Identity and Passport Service, which is responsible for the carrying on of activities, is not covered by the Bill?
Mr Hayes
Activities of the kind that I mentioned and about which my hon. Friend spoke in his contribution are covered by other legislation and a different set of regulatory protocols, which the Bill would contradict. It would require considerable work to achieve a happy marriage between the two. It is impossible to pass the Bill in its current form without its having an impact on other legislation which itself sets up a series of regulatory mechanisms to deal with some of the matters that he described. I do not want him to assume that this is a criticism of the essence of his argument or of the principles upon which it is based; it is purely an observation that technically it would not necessarily be possible for the Government to adopt the Bill in its current form.
Mr Chope
My hon. Friend seems to be saying that regulatory legislation is so complex that it is impossible to simplify it in the way that the Bill would simplify it. If the regulatory legislative framework is so complex, why do not the Government get to grips with making it simpler?
Mr Hayes
Later in my contribution I shall describe some of the ways in which the Government have done just that. They have taken a firm grip on these matters. Even in these early days of the long regime to which we can look forward and in which I hope to play a small part, we are making significant progress in the way that my hon. Friend wishes us to do.
It is not a question of the Government not intending to grasp the nettle—to take a grip on the subject, to use his terms—but of doing so in a way that is consistent, coherent and deliverable.
Lest I dwell too much on the first part of the Bill, let me deal with the second part. The Bill would stop a regulator, subject to specific conditions, introducing a charge for a previously free service. A regulator would be able to introduce new charges where previously there had been none on the condition that a report setting out the benefits of the new arrangements was laid before and agreed by the House. Were I a rather more sarcastic person than I am, and if I wished to tease my hon. Friend, which I would not do, as you know, Mr Speaker, I might say to him that he is himself in the Bill establishing a rather elaborate system, to put it mildly, for dealing with the test that he describes: a report to the House, which presumably will be debated, with no real clarity about the length or nature of that debate, and perhaps even referred to a Committee of the House. Who knows how long that process might take? It is absolutely right that these matters should be scrutinised, but the implication of my hon. Friend’s proposals is that we might lengthen, both in terms of time and substance, the mechanisms by which we assess, implement, gauge, and judge necessary regulation.
Mr Hayes
It is that part of the Bill that I am addressing, Mr Speaker, in very specific terms, and, yes, it could be argued that it makes the system more accountable, in the sense that it brings the matters before the House, but the spirit that lies behind the Bill and the powerful advocacy of my hon. Friend the Member for Christchurch, not just now but for all time, of the need to place fewer burdens on business, is that rather than extending and elaborating the process by which we implement, consider and, indeed, devise regulation, we should simplify it.
That brings me to the final provision of the Bill, which focuses on the duties of responsible Ministers and sets out plans to prevent them from increasing funding for their regulatory bodies. That would mean not only that the charging framework within which regulations operate was restricted, but that regulators should not have any additional funding from central Government as a result. I can understand why my hon. Friend argues that, and why the Bill seeks to put that argument into practice, but a better measure of the quantity and nature of regulation is required to consider these matters as fully as they might be considered.
Let me find common cause with my hon. Friend. It is absolutely right that the House, and indeed the Government, should consider the impact of regulation. The CBI has argued that regulation is one of the key elements inhibiting growth. Its April 2011 survey described a Nigeria-style regulatory regime—its words, not mine, I hasten to add. It said that only that country had a similar regulatory burden to that of Great Britain. Apparently, according to the CBI, we rank 89th out of 139 countries for having the biggest regulatory burden. Its concern was that that regulatory burden had a powerful influence on growth, and unless we deregulated, as my hon. Friend’s Bill would, we would inhibit growth. This is not the first time that the CBI has argued this case, nor is it the only organisation that does so.
My hon. Friend and others will be familiar with the Institute of Directors’ regulation reckoner, which it produces regularly, and I have here the 2011 issue. The IOD estimates that the total administrative costs of regulation for business for 2011 are growing and have a considerable impact on business both large and small. It argues that directors spend 17 hours a month on regulation administration and that the annual cost of regulation administration is £7,664 for each director. It says that work forces spend 106 hours a month on regulation. To put that in crystal clear terms, the IOD argues that the burden on work forces is equivalent to one member of staff working continuously on regulation from 1 January until 26 August, which is 34 weeks, to complete a business’s annual regulation administration. That is the kind of evidence that stimulates my hon. Friend’s concerns and motivates him in his mission to address these matters and to encourage the Government to do so too. This is why it is important that we debate these matters, and it is absolutely why the Government also take them seriously. The CBI argues that in order to avoid a double-dip recession the Government must deal with regulation. My hon. Friend suggests that his Bill, which is essentially about the nature and cost of regulation, would help us to do that.
The arguments of others suggest that regulation does not emanate only from this place. It is the view of the Bruges group, with which my hon. Friend is familiar, that the cost of regulation to businesses that we in this country enjoy—or perhaps I should say endure—is about £100 billion, with EU regulation accounting for about half of the total. I know that you will be as shocked as I am, Madam Deputy Speaker, to hear that, and as determined as I am that we adopt such regulation only where absolutely necessary, and that we certainly do not gold-plate it. Yet the IOD tells us that that is precisely what the previous Government did. That is the risk we face.
Not only must this House be diligent in ensuring that the additional regulatory burden I have described is not piled on to businesses large and small, but we must be even more mindful of the need to ensure that that which comes from other lands does not make the circumstances even worse. To that end, the Bill includes a definition of a regulatory agency in order to try to deal precisely with the matters I have described. However, I am advised by officials that the task of defining a regulatory agency, as the Bill does, is always a very complex one.
It might be helpful to build on that advice and start by reflecting on the range of agencies and organisations already involved in our system of regulation, because for the proposed agency to have effect it would need to sit comfortably with the existing framework of regulators and be consistent with the forms in which that regulation is constituted. The large number of organisations and individuals that play a part in securing compliance form a complex landscape. Businesses have the primary responsibility for meeting their obligations under the law, but a number of agencies in the public and private sectors, as well as civil society organisations, also play a role.
My hon. Friend the Member for Christchurch will know that national regulators secure adherence to the rules in many areas of modern life, including nuclear safety, pensions and health. He spoke earlier about some of the others, and I criticised him for using examples that would perhaps not be covered by the scope of the Bill, but none the less he made a powerful point about the range of areas of life and the range of activities and business on which regulation has an impact, and I understand his point.
Local authorities also have a role in enforcing the law in areas such as food safety, under-age sales and consumer protection. Were the Bill to proceed, the regulatory agency my hon. Friend seeks to establish would need an appropriate legal interface with those authorities.
Mr Knight
I wish my hon. Friend would use some of this cold water to wash his car, rather than to pour over the Bill. Why does he not see himself as a reforming Minister and grasp the issues so that he can take this matter forward, rather than using them as an excuse for doing nothing?
Mr Hayes
I am disappointed in my right hon. Friend, as a fellow owner of a Jensen Interceptor Mark III and member of the owners club, because what I have said is merely my preliminary remarks on why the Government cannot accept the Bill in its current form. I will move on to why we feel that aspects of the argument put forward by my hon. Friend the Member for Christchurch are worthy and compatible with the Government’s determination to reform these matters in a way that reduces the burden of regulation. My right hon. Friend the Member for East Yorkshire (Mr. Knight) should not be so hasty in assuming that I do not share the reforming zeal that motivates him and others to make life more straightforward for our businesses so that they can add to the prosperity we all seek.
On the specifics of the Bill, my hon. Friend the Member for Christchurch advocates a regulatory agency. However, unless that agency were to interface with the existing mechanisms for dealing with regulation, it would be impossible for the Government to accept its establishment as framed in the Bill, because there are many agencies that play an important role in the regulatory system, in both national and local government, and also agencies that play a role beyond the framework of the law. Trade associations, in particular, provide a service to businesses in the form of regulatory advice and guidance. Lord Young’s review of health and safety law, which has been referred to, highlighted the extent to which other agencies, such as the media and private consultancies, can create their own regulatory burdens. We are therefore dealing with diverse responsibilities.
In some areas regulation is effectively free to business, which is why, as the Bill deals with costs, it is important that we assess which types of regulation impose costs and which do not. The costs of the regulator and regulation are often met by the Government. My hon. Friend, in his speech and in the Bill, makes no detailed assessment of the balance between the costs absorbed by Government and the costs imposed on businesses. The Government’s view is that in many cases it is in the interests of fairness that the costs of regulation are met by those who are regulated. Where such fees are charged, they can take a variety of forms, from licences to levies and charges for specific services.
In those terms, the Bill, as I have said, starts from the commendable idea that businesses should be given as much certainty and transparency as possible on how they are charged by regulators and that appropriate controls should be in place to govern the way in which they are imposed. In that respect, I find common cause with both my hon. Friend the Member for Christchurch and my right hon. Friend the Member for East Yorkshire, who call for a zealous approach to assessing those costs and measuring how Government activity might add to them. It is right that the system, with regard to the imposition of costs, how they are gauged and how they grow, is properly assessed.
Before I address the Bill’s specific points, I think that the House would expect me to put in context the scale and ambition of the Government’s approach to regulatory reform. Just yesterday I was looking at those matters with the Prime Minister and the Deputy Prime Minister in relation to apprenticeships. As you know, Madam Deputy Speaker, it is the Government’s intention to build more apprenticeships than Britain has ever had before, and we were looking at how some of the costs of putting in place the necessary regulation on apprenticeships could be lightened. For example, for large companies that are providing apprenticeships, we have announced that those costs—
Madam Deputy Speaker (Dawn Primarolo)
Order. I am very grateful to the Minister for supplying the House with so much information, but I am struggling to ensure that he remains in order. I understand his point about burdens, but the Bill relates to fees already charged for services, not to increasing those fees. I would be grateful if he returned to that specific point.
Madam Deputy Speaker
Order. It might be helpful, but I have said very specifically to the Minister that this one-clause Bill, as Mr Speaker previously pointed out, is about fees charged, rather than burdens. The Minister must stay in order. If he does not, I will intervene on him again, so perhaps he will reflect on what might be helpful in those circumstances.
Mr Hayes
Of course, Madam Deputy Speaker. I am guided, as ever, by your advice in these matters.
The Bill suggests that the fees charged for services that are determined by law and part of the regulatory agenda should be gauged in a way that allows this House to make a judgment about their impact. The Bill, in those terms, needs to be assessed against its likely impact and effectiveness, but we are right to argue that it also should be gauged against the existing provisions, both in law and beyond, that affect costs and fees in respect of regulation, and the Government’s absolute determination to reduce that burden.
So, my hon. Friend will want to know that the moratorium on new domestic regulations for smaller companies, which the Government have put in place, certainly affect the provisions of this Bill. The determination of the Government to publish all regulations sector by sector will to some extent do what the Bill intends, because it will give us a clearer indication of the character and nature of costs, and how they rise.
Mr Chope
Surely the effect of the Bill will be to ensure that regulators are not able to increase their fees and charges beyond the rate of inflation, and they will therefore have to reduce their costs and probably their regulatory activity, which in itself will be beneficial to business, will it not?
Mr Hayes
We are back—are we not?—to the point that was made earlier in this brief debate, about quantity and quality, because it is true that the Bill will necessitate the reconsideration of quality and effectiveness because of the link to charge. In other words, regulation will have to be legitimised around price, but it would be dangerous to assume that the effect of introducing that new provision—unless seen in the context of what is already there; the point made is existing charges and costs—might be as profound as my hon. Friend describes.
Mr Chope
My hon. Friend will realise that HM Treasury’s guidance on fees and charges requires all regulators to cover their costs where they have fee-setting functions. Therefore, the Bill, by forcing regulators to reduce their costs, which they can pass on in the form of fees, will reduce their activities and, thereby, the burden of regulation.
Mr Hayes
That—ipso facto—is certainly the case, but the qualitative judgment about regulation that I have advocated would need to be applied, too. My hon. Friend says that the Bill needs to be set in the context of what the Government have already agreed. The Government have agreed, as he knows, that they will regulate only
“having demonstrated that satisfactory outcomes by alternative self-regulatory or non-regulatory approaches; and where analysis of the costs and benefits demonstrates that the regulatory approach is superior by a clear margin to alternative self-regulatory or non-regulatory approaches; and where the regulation and the enforcement framework can be implemented in a fashion which is demonstrably proportionate; accountable; consistent; transparent and targeted.”
If one applied those principles to my hon. Friend’s argument, one would find, I assert, that his Bill is not necessary. Furthermore, I assert that his Bill, rather than applying those broad principles—I say “broad”, but they are clear in intent—would put in place a series of mechanisms that, as I argued earlier, might lengthen and make more complex the process.
The Bill sets up a mechanism by which Parliament must scrutinise those matters, and my strong assertion and, indeed, recommendation to my hon. Friend is that the adoption of the regime I have just described, already articulated by the Government, is a more effective means of achieving his ambition than the Bill, which might have perverse consequences, albeit unintended, in making the system rather more costly and difficult than it need be.
Mr Chope
May I invite my hon. Friend to move away from the rhetoric to the reality, in the context in particular of the Care Quality Commission’s decision to start regulating dentists, who are already adequately regulated, and then to impose on them charges of £800 a year each to fund the regulation? The provisions of the Bill will catch that activity.
Mr Hayes
I am going to come on to dentists and the rationale for dentistry regulation, because there has been some debate about it already this morning in consideration of this Bill, but before I do so perhaps I may be very specific, as you have invited me to be, Madam Deputy Speaker, about fees, charges and levies, which lie at the heart of the Bill.
The fundamental policy of government is to charge for public-provided goods and services, where that approach helps to allocate the use of goods and services in a rational way, because it prevents waste through excessive or badly targeted consumption. The Government argue that that makes for easier comparisons with the private sector, promotes competition and helps to develop markets. When a fee is charged for access to public goods or services, there are specific rules on how the charge should be determined, and it is important to protect Parliament’s rights to decide which services should be charged for and how public resources are allocated.
That is much like what my hon. Friend wants to achieve, but my argument is that there are mechanisms already in place to do what we wants. I accept that it is necessary for those mechanisms—how can I put it?—to be enlivened and accelerated by a commitment by Government to be absolutely scrupulous about where regulation applies, what is charged for and how those charges, those fees, should be gauged. I am giving my hon. Friend an assurance—not gold-plated but copper-bottomed, one might say—that the Government will indeed be determined, as he asks us to be, that the extent and character of that regulation, and the fees and charges associated with it, should be legitimised, should be moderate and should not increase in an unjustifiable way.
A word about the specifics. My hon. Friend asks me to be less rhetorical. Most people enjoy—I will not put it more extravagantly than that—the rhetoric with which I embellish what I do, but I am prepared to take the slings and arrows as well as the praise, so I will for a moment or so move from rhetoric to detail.
The rationale for dentistry regulations, which my hon. Friend draws attention to as an illustration of the purpose of this Bill, is clear. The Care Quality Commission is the responsible regulator, and the registration of dentists is a new requirement, as he says, reflecting the commission’s new regulatory responsibilities. The purpose of registration is to bring a single, consistent approach to monitoring dental practice, including private dental care practice, for the first time. This is regarded as an essential basis for encouraging swift action to protect the public, and it will give the public an accessible single source of information on quality. Fees are variable, according to practice, size and type.
That is a perfect example, if I may say so, of two points that I have made: first, the regulation that is put in place should be coherent, clear and as simple as possible; and secondly, the fees and charging regime associated with that regulation should be established against a set of criteria that can be justified and supported by the profession concerned.
I do not want to delay the House unduly, so I shall move swiftly on to the matter of the principles that underpin charging regimes. As we know, Madam Deputy Speaker—your advice has guided me accordingly—this Bill is principally about charges and pricing. The principles that apply to pricing and charging by regulators are those that apply to publicly provided goods and services in general, and they have at their core the central doctrine of setting charges to allow full cost recovery. We need to remember that in many cases regulators give consumers and others confidence that regulated sectors are meeting their legal responsibility. Regulators can also create the conditions that provide businesses with a level competitive playing field by taking effective action against criminals operating in their respective markets. We need to remember that in many cases it is appropriate for those whose activities need to be regulated to bear the cost of regulation, not the taxpayer.
Mr Chope
Perhaps my hon. Friend would apply the principle that he has enunciated to the regulator on access to higher education. Most people would think that that is a totally unnecessary additional burden. Is he saying that the cost will have to be borne by the universities?
Mr Hayes
My hon. Friend is displaying the mischievous quality for which he is known and which the House enjoys, but I will not be tempted, Madam Deputy Speaker, for fear of your benevolent but strict rule, to get into a debate about higher education access or anything related to it, except where it is absolutely pertinent to the Bill before us. I rather suspect that you might come to the same conclusion that I have, which is that it is not completely pertinent to the Bill, so I will continue on the very strict and controlled theme that I was developing.
We will consult shortly on the extent to which some of the functions currently carried out by the statutory regulators might be performed either by businesses themselves, through better recognition of internal quality controls, or by other agencies through services such as the use of accreditation and certification, which can provide some of the safeguards traditionally put in place by state regulators. This would have a direct impact on costs, fees and charges, because in those circumstances the decisions about those matters would be dealt with within the sectors or businesses themselves.
There will be cases where we can lighten the burden of regulation and the character of some of the costs that my hon. Friend has highlighted by taking a more radical approach to where regulation should apply, who should regulate, how decisions should be made about its extent, and, most saliently, what should be charged for what service. My hon. Friend is absolutely right that that decision is better taken at the sharp end, if I might put it in those terms, rather than distantly in Westminster and Whitehall. However, there will inevitably be cases where the intervention of a state regulator is required, particularly to protect consumers or to provide a level playing field for businesses. I take the view that professional standards in these terms should be looked at more closely by Government. In some cases, as I suggested earlier, the adoption of professional standards may allow us to reduce the overall burden of regulation, and the costs associated with it, in the way that my hon. Friend recommends.
The Treasury’s publication, “Managing Public Money”, sets out the main principles for dealing with resources used by public sector organisations. It makes it clear that:
“Where a fee is charged for access to public goods or services, there are some specific rules about how the charge should be determined. It is important to protect Parliament’s right to decide which services should be charged for, and how public resources are to be allocated.”
This principle is as valid in the case of regulation as with any other public service. Setting a fee or charge for a public service usually requires powers in primary legislation, with the charge structure and each charge set out in secondary legislation. Therefore, a parliamentary approval procedure of the kind that my hon. Friend advocates in his Bill already exists, and, as I said earlier, it is one that is less likely to lead to delay and complexity than the albeit well-meaning provisions in his short Bill. The guidance on calculating fees is also clear, stating that the full cost of each category of service should be measured realistically and objectively.
As I mentioned earlier, local authorities are regulators, and they sometimes provide purely discretionary services. In this regard, they operate within an additional framework of control set by the Local Government Act 2003. I know that my hon. Friend will be familiar with section 93 of that Act, because he researches these matters with diligence and care before he comes to the House to speak about them. He will know that that section, which is headed,
“Power to charge for discretionary services”,
contains the power that I have described. This power is subject to a duty to secure that, taking one financial year with another, the income from charges under the section does not exceed the costs of provision—precisely the point that he made in an intervention a few moments ago.
Mr Hayes
The purpose of the Act that I mentioned is to ensure that organisations—in this case, local authorities—do not make a profit out of the service, so that the cost, as I said, is related to the fee. My hon. Friend is arguing, is he not, that even where the cost of provision—it may be a perfectly justifiable cost, by the way—grows or changes for some reason, the fee associated with that cost could not be raised. If taken to its logical conclusion, this would place local authorities—or, if we apply the principle more widely, Government—in the impossible circumstance of not being able to recover costs of provision from businesses or individuals even where those businesses or individuals were gaining from the application of that provision. That would be a perverse effect of his Bill.
Mr Chope
Let my try another one on my hon. Friend. It relates not to local authorities but to the Forestry Commission, which is a regulator. The Forestry Commission is having its grant cut by central Government, but it still needs to carry on its regulatory functions. In the New Forest, it is thinking of funding quite a lot of those costs by raising car parking charges, which do not currently exist there. Where does any public accountability come into that?
Mr Hayes
Again, I am not going to speak about the specifics of that because it is a matter that I would want to look at in more detail before I said anything definitive. The principle remains that we should address the relationship between the scale of provision, the cost and the fees charged. That should, quite properly, be set out by this House in regulation, if not in legislation, and—I take my hon. Friend’s point—it should be proportionate.
Let me repeat, for the benefit of my hon. Friend and the House, that the Government share his determination to scrutinise these matters with new zeal and with diligence. He is right that we need to have a basis on which we consider and legitimise regulation of this kind and the costs and fees associated with it. I agree with him that it is important that agencies, whether in local government or elsewhere, can justify what they charge. I simply do not think that this Bill is the best way to do that. I welcome the fact that its introduction has given us an opportunity to consider these matters. I may say a little more about that in my final remarks.
The primary authority partnership scheme between businesses and regulators constitutes the kind of discretionary service that I was describing prior to my hon. Friend’s intervention. It was established under the Regulatory Enforcement and Sanctions Act 2008 to provide more consistent regulatory enforcement for businesses, charities and other organisations operating in more than one local authority area. It entails an advisory partnership between a specific business and a given local authority. Having assessed the resource requirements of the primary authority partnership scheme, the local authority and the business have to agree how the costs will be met.
The local authority is entitled to charge the business for services applied through the partnership. In deciding whether or to what extent to charge the business, the local authority should consider all relevant matters, including the local authority’s policy in respect of supporting local economic prosperity and the existing resources provided to the business by the regulatory service and other services of the local authority. When advice and guidance have been developed for use with more than one business, an individual business should pay no more than a reasonable proportion of the costs. Where a local authority decides to charge for some or all of the services provided to a business, it can recover only the costs reasonably incurred in providing those services. In calculating the costs, the local authority should, like a national regulator, have regard to the guidance issued by the Treasury in “Managing Public Money”, to which I referred earlier.
A further statutory provision that affects the way in which regulators charge is the Regulators’ Compliance Code. I am surprised that we have not heard more about the code in our considerations, because its existence mitigates some of the arguments of the advocates of the proposed legislation. It is a statutory code of practice to which regulators must have regard in their work. It puts forward the general principle that
“Advice services should generally be provided free of charge, but it may be appropriate for regulators to charge a reasonable fee for services beyond basic advice and guidance necessary to help ensure compliance. Regulators should, however, take account of the needs and circumstances of smaller regulated entities and others in need of help and support.”
I draw the House’s attention, in those terms, to the effect of regulation on small business. Smaller businesses often find it more difficult to deal with these matters, purely because of scale. Excessive regulation can have an extremely damaging effect on small business growth. As a Government, we will certainly look again at the effect of regulation on business as a direct result of the overtures of my hon. Friend the Member for Christchurch.
Mr Chope
I am grateful to my hon. Friend for saying that he will look again at these issues. Will he address his remarks to the issue of small charities, such as Julia’s House, which are even more deserving of help? Despite the guidance to which he referred, the Care Quality Commission imposes the same standard charges on a children’s hospice with three or four beds as it imposes on much larger, and even commercial, organisations. How is that consistent with the guidance?
Mr Hayes
My hon. Friend is right that small organisations in the voluntary and charitable sector are also affected by the burden of regulation. I will, as a result of his overtures, look at that matter too. I know that the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), who has responsibility for regulation, takes these matters very seriously. He has been a great champion of small organisations in this respect. However, it is important that the Government are informed by the House. It is clear that Members from both sides of the House understand that if we are to build the big society that we seek, small organisations, charities and community organisations will play a critical part. It is right that we should look specifically at how regulation affects those organisations, and we will do so as a result of the arguments of my hon. Friend the Member for Christchurch and other Members.
I will move on to explain why we feel that legislation is unnecessary in this case. This Bill, although it makes an immensely important point about the effects of regulation in practice, is not one that the Government can support. That is not just because there are existing controls that address the issues that the Bill seeks to address. It is also because regulators have a responsibility to ensure that they provide value for money and that the costs are as low as possible, while the quality of regulation remains appropriate. There needs to be flexibility in practice. Although we agree absolutely that we need to ensure that the burdens on business as a whole, and on the other organisations that we have just spoken about, are taken into account when we introduce or review regulations, the flexibility that I have described needs to reflect a wide range of regulatory circumstances. That would be inhibited, at least to some degree, by my hon. Friend’s Bill.
There are circumstances in which a modest uniform charge is appropriate. Many licensing regimes, where individuals must apply for a licence to trade, have that character. I spoke earlier about my view that the adoption of professional standards through licences to practise can be helpful in reducing regulation. It can provide a simpler series of mechanisms to guarantee quality, protect public health and ensure public safety.
Mr Chope
I am sorry to go back to this point, but my hon. Friend keeps referring to the issue of professional standards and duplication. How does what has happened to dentists fit in with that philosophy? They were already regulated by their own professional standards body, and now have to pay a fee to be regulated by the Care Quality Commission.
Mr Hayes
We have spoken of dentists already. Perhaps I may take this opportunity to pay tribute to my own dentist, Lisa Jamieson of the Fen House dental practice in Spalding, who looks after my teeth and those of my wife and children. I will discuss this matter with her, because I believe that it is important as legislators that we are in touch with those whom legislation affects. Nevertheless, the case that I made on dentists is that the adoption of the new regulatory regime will simplify how we ensure that dentists are doing what they should. There are circumstances in which a new approach, framed by the desire to reduce regulation, can assist us not only in the matter of regulation, but in its cost.
There are circumstances in which a substantial charge is appropriate. Some regulatory regimes require the inspection of hazardous, highly technical processes, and would otherwise present a substantial cost to the public. There are also circumstances in which a tiered approach is appropriate, for instance to reflect the costs to the regulator of regulating different sizes of business.
The proposal that my hon. Friend articulated with such style and charm would limit regulators’ flexibility to innovate and incentivise in ways that work to the benefit of good, compliant businesses. The existing system, by contrast, supports that flexibility. Regulators might seek to reduce fees for some regulated organisations —we have spoken of small businesses, small charities, community organisations and so on—to reflect the intrinsically lower costs of the services provided to them. Yet they might simultaneously increase charges to organisations when the service in question is palpably more costly. That would surely be the case in respect of larger businesses, in the case of which checking compliance requires significantly more time and resources.
My hon. Friend’s ambition is to allow small organisations, be they businesses, community organisations or charitable organisations, to thrive because of the lighter hand of Government that both he and I wish to see applied. He will note that I take that ambition so seriously that I have said the Government will examine it once again with a critical eye. It is entirely possible to achieve it within the flexible regime that exists in respect of fees and charges, and it might, ironically, be inhibited by the proposals in his Bill.
Meanwhile, the Health and Safety Executive has recently announced a proposal that would impose charges on businesses that were found to be in material breach of health and safety laws. It would not seek to recover costs for purely technical breaches, of course, and compliant businesses would not pay a penny. That is another example of the flexibility that I am advertising as a virtue of the existing regime.
It is fair to say that a range of approaches are appropriate, including ones that create strong incentives for better practice in businesses. In practice, the relevant legislative framework allows for all those approaches, and it is not appropriate to impose a single framework on all regulators. It is for them to determine the relevant approach, within the powers confirmed by Parliament and the public spending rules overseen by the Public Accounts Committee and the Comptroller and Auditor General. The existing arrangements provide meaningful parliamentary oversight, combined with a pragmatic foundation for regulators and Government to adjust their approach according to dynamic circumstances. If we were to adopt an entirely different approach founded on the consumer prices index, as my hon. Friend suggests, rather than on a cost recovery basis, the incentives would be very different.
Finally, increases in fees limited to the CPI are unlikely to reflect changes in a given regulator’s costs. My hon. Friend argues that the cost to regulators is not the issue, and that the charge to organisations, whether they be businesses, individuals or otherwise, is always of paramount importance. However, it is equally important that there is some relationship between provision and fee, between cost and charge. It would be a very blunt instrument to apply the mechanism at the heart of the Bill in the way that he suggests.
If the increase in the full cost of a service exceeds CPI, capping fees would either leave the taxpayer to pick up the bill or leave the regulator to do the job within its official resources. It would not necessarily save taxpayers money, and it could arguably let businesses and individuals off the hook, because they would not have to pay the price necessary to cover the regulator’s costs. That might be my hon. Friend’s intention, but I have never heard him suggest before that the taxpayer’s burden should be increased in such a blunt way. Indeed, I know for a fact that he has long been an advocate of cutting taxes where we can.
Mr Chope
I thought for a moment that my hon. Friend was going to traduce me. I made it quite clear at the beginning that the Bill would not add to the burden of taxation or public expenditure, and that is set out clearly in clause 1(3). I am surprised that he is not praising that subsection. Can he give some examples of where he thinks it is reasonable for regulators to increase their costs beyond the rate of inflation?
Mr Hayes
If the cost of provision to a regulator rises for technical reasons, and that regulator has a perfectly sensible set of regulations with the protection of public good or public safety at their heart, it would be entirely appropriate to relate the cost of that provision to its price. That should be legitimised and justified, and it is absolutely right that we put in place criteria that ensure that any such price increase is a true reflection of a change in cost, but to do the opposite and prohibit any change in charge regardless of a change in the cost or character of provision, as my hon. Friend suggests, would be a very blunt instrument. I am arguing for flexibility; he, rather untypically, is arguing for a rigidity in the application of public policy, insensitive to circumstances. With a bitter irony from his perspective, that might increase costs to the taxpayer, contrary to the part of the Bill that makes it clear that that is not his intention.
I do not wish in any way to be excessively critical of my hon. Friend, who is a distinguished Member, but I argue that the Bill has at its heart a contradiction. I know that that is unintended, but none the less, it would have potentially dire consequences for the Government and for him. His reputation as a tax saver, as a guardian of the public interest and as a man who stands in the way of excessive state interference in the affairs of individuals and in the freedom that he cherishes, is at stake. I stand here as his guardian, and as the protector of his interests.
I know that this will disappoint Members, but I wish to begin to move to my conclusion. It would be bad for both the public, whom we are seeking to protect, and conscientious businesses that are doing their best to comply with the law, if we left regulations unenforced because the Government did not have the capacity or power to supplement any shortfall. The Bill would limit the Government’s ability to intervene, which would create just such a circumstance.
Our view is that the existing flexible framework provides the best means of controlling and keeping an appropriate limit on the fees and charges imposed by regulators. However, for the avoidance of doubt and to reassure my hon. Friend, let me be crystal clear that there is a certain determination on the part of this Government to ensure not only that the quantity of regulation is reduced but that its quality is re-examined with a vehemence that has not been typical of recent Governments, and that the costs associated with any such regulation are tested empirically in a way that protects individual, business, consumer and taxpayer interests. The existing regime, which provides for charging at full-cost recovery, enables regulators to recover costs from those who are regulated.
It is right that regulators have a responsibility to ensure that regulation is efficient, effective and provides value for money in the way the Bill intends. My hon. Friend is in tune with C. S. Lewis, is he not? The latter said:
“Aim at Heaven and you will get Earth thrown in. Aim at Earth and you get neither.”
My hon. Friend aims at a heavenly circumstance in which regulation is only ever applied out of absolute necessity and at minimum cost. We are sympathetic with that spirit, but perhaps the more important point to take from this debate is the extent to which any regulation necessarily brings with it some expense. We need to get to grips with that problem at source. I have spoken repeatedly in this speech about the measures the Government have put in place to constrain the flow of regulation. I believe that that is the right way forward. We have listened to his overtures, however. This debate has given us the opportunity to reconsider these matters, and has been an additional spur, a goad or perhaps just an encouragement to be still more determined to reduce the regulation on individuals, businesses, charitable organisations and others that might inhibit growth and, worst of all, inhibit virtue.
Mr Chope
I would like to reply briefly to this debate. I am grateful to the Minister for setting out, in just over an hour, all the reasons why his Department does not think that this Bill is the right solution, although at least he acknowledges that there is a problem. In the absence of any other possible solutions, however, I am not sure that one can say this Bill is not worthwhile. Although the Minister talks a lot about sympathy and says he wants to reduce the quantity and increase the quality of regulation, it is apparent from the figures that he gave, as well as the quotes from the CBI and the Institute of Directors, that things are probably getting worse rather than better. The shadow Minister made that point in relation to the number of regulations being introduced and removed from the statute book. I sympathise with my hon. Friend the Minister: he is not the Minister responsible for deregulation; that is not his main brief and he is here today as the departmental Friday duty Minister. However, I was disappointed that he did not respond to what the hon. Lady had to say.
In essence, this is whether we are going to try to control the stealth taxes reflected in the increased charges that regulators impose on consumers, individuals, businesses and charities. Nothing I have heard from the Minister gives me any encouragement in that regard. He was unable to explain—to my satisfaction anyway—why the Care Quality Commission is now trying to regulate dentists. He was unable, or did not wish, to engage in an argument about how we were going to pay for OFFA, the higher education access regulator, and whether it was justified or whether it was going to be a new financial burden on the universities. He was unable to answer my question about the Forestry Commission now seeking, because of a cut in Government grants, to fund its regulatory activities by imposing new charges that will force people to pay for their car parking in the New forest and elsewhere.
Treasury guidance states that regulators must increase their charges to reflect their costs, but there is no guidance saying that those costs must not increase by more than the rate of inflation. That is the key to it. If the regulators were not allowed to increase their charges beyond the rate of inflation, they would have to keep their costs to within the rate of inflation. They would have to reduce their costs and become more efficient. I cited Ofcom as an example of a regulator that has reduced its costs by 20% in the past year. The BBC, too, is now having to concentrate its mind on reducing its costs significantly because of the pressure put on it.
Mr Hayes
I plead guilty to two things—to not being the Minister for regulation, and to what my hon. Friend described earlier as elegant and flowing rhetoric. However, I will not plead guilty to not dealing with dentists. We did dentists to death! My argument was that the new regime would simplify the regulatory system and its associated costs and fees. That is in contrast to the current regime, which is more costly and confusing. Surely that is in the spirit of his Bill.
Mr Chope
I forgive my hon. Friend because I do not think he is an expert on dentistry. However, I do not think that he or his officials have addressed the fact that dentists are already properly controlled by the professional dentistry bodies. The CQC is now adding to that regulatory burden, rather than substituting for or simplifying it. However, we can have a separate debate about that on another occasion perhaps. That example alone shows that all the lofty rhetoric about the Government’s intentions —even those in the coalition agreement—to reduce the burden of regulation is not being reflected in practice.
I am grateful to my hon. Friend the Member for Bury North (Mr Nuttall) for his support for the Bill, to the shadow Minister for her observations and to the Minister for what he has said. In essence, he has criticised the two parts of clause 1 designed to introduce flexibility. I could have just said that no regulatory authority should introduce a charge in respect of a service currently provided free of charge. Perhaps on reflection that might have been better because it would have been clear. I thought that we needed some flexibility, which is why I used the wording I did, yet now I have been criticised by the Minister for doing so.
The Minister said—this is the most worrying aspect of today’s debate—that the panoply of the legislative framework covering regulation is so complex and impenetrable that it is impossible to simplify and cut across it in the way I am trying to do with the Bill. I hope that his Department, instead of producing these long, wordy briefs, will start getting to grips with rationalising the legislative framework around regulation and regulatory burdens. I hope then that we will be able to deal with the issues in a simpler way.
Mr Hayes
I will give this guarantee to my hon. Friend for the benefit of the whole House. In the matters for which I have responsibility within the Department for Business, Innovation and Skills, I will stand tested by the criteria that he in broad terms has established. We will create a system that is freer, less burdensome and less regulatory and that allows those associated with further education, skills and lifelong learning to go about their business properly, in the way they see fit and in response to need, rather than be dictated to by the micro-management that typified the last Government.
Mr Chope
I am grateful to my hon. Friend for that commitment. In due course perhaps I will table a parliamentary question so that he can explain what has happened under his leadership over the past year on those matters. It is important that the Government do not just talk about what they are going to do in future; they must show that they are reducing the burden of regulation. I am very depressed that they are not prepared to support the Bill, although I wish to test the will of the House on the matter.
Question put, That the Bill be now read a Second time.