Deregulation

Tuesday 10th January 2012 Westminster Hall

13:30

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

Thank you, Mr Sheridan, for calling me to speak. It is a pleasure to serve under your chairmanship in this important debate about Government policy on deregulation.

I secured this debate partly to publicise the Government’s desire to slash red tape for businesses—and, indeed, in every walk of life—but also to encourage businesses to be very specific, and to participate in the review of red tape so that we do as much as we can to get rid of the red tape that is strangling parts of our industry.

If I were giving a termly report, I would say to the Minister and his colleagues, “Good progress so far, but could do even better.” I agree with others that many huge strides have been made. Understandably, the topic of red tape has the full attention of the Prime Minister and No. 10 Downing street, but it is important that it has the attention of all Departments, covering every industry possible.

My challenge to the Minister and his colleagues is to go further and faster, because in many cases deregulation is free; in fact, it will often save businesses and Government money. Even more importantly, however, we all know that regulation often drives cost. That relates not only to implementation by businesses of measures such as the waste electrical and electronic equipment directive, but the bureaucracy, including inspection to check that measures have been implemented. Regulation is a self-perpetuating industry. We know that the forces of conservatism are entrenched when it comes to ensuring that we have good regulation, which often means a lot of regulation. However, the Minister and I know, as do many other Members, that it is not a case of having no regulation; often, it is a case of having better regulation and less regulation.

It will take great will-power to wrench aspects of bureaucracy into the post-bureaucratic age. Take a simple thing like the requirement for companies to keep six years’ accounts or VAT records. If there are not going to be tax losses, why do we not trim that requirement down to two or three years? There is a desire by Government to make sure that companies have information, just in case. There are other aspects of administration that require businesses to provide information constantly to the Government, whether it is to the Office for National Statistics or other bodies. Frankly, all those things add very little value to a business in its own microcosm; basically, they provide information for free to the Government; they are a way of generating data. In the macro-economic sphere, they may seem good, but if businesses are employing people just to generate statistics or other information for the Government, just in case it is needed, or to comply with a policy, or to satisfy an insurer, and so on, the risk is that businesses will use that talent and those resources not seeking to grow, but seeking to comply.

Of course the European Union has been a huge source of the regulations that have been brought into British law. The majority of the regulations imported from the EU have been generated as a result of the single market and the EU continuing to issue directives. Although I think that we are all great supporters of the single market, I am sure that many of us are not particularly enamoured of how much regulation the single market has brought to our shores. In particular, I am thinking of aspects of certain environmental directives, such as the habitats directive or the water directive.

In a recent statement, the Chancellor said that we want to review quite a lot of those directives, not only to check that they are having the desired effects—the UK Government would not have signed up to them if they did not wish to see a more general approach in particular areas—but to ask whether we are being over-zealous in our interpretation of the directives. Are we getting the balance right between what is in the interests of people and what is in the interests of nature? Are we getting the balance right between consumer and producer? It is critical that we ensure that we have a harmonised approach to understanding how directives should be implemented; we certainly should not gold-plate them in their implementation.

Just last week, I met farmers from my community who are worried about the water directives, how they have been implemented, and the risk that implementation causes in terms of abstraction. That matters because Suffolk is a great producer of many of the crops that we all enjoy around the UK. Suffolk has three potato seasons a year, and it also produces other root vegetables. If Suffolk was not producing that quantity and quality of food, we would basically have to start importing a lot more food. We must ensure that we get the balance right. Elements of food security matter, but so does the environment. We have to respect the environment, sustaining it for the future, and our own farmers know that better than anybody else; they do not want to put themselves out of business overnight. A balanced, sensible, common-sense approach, which involves farmers as much as possible, is needed.

There is another community initiative in my area that has recently been affected by regulation. Plans for a community transport bus are being frustrated at the moment because of a restriction that means that people who passed their driving test after 1995 can carry only a certain amount of weight. That is another European directive that was probably common sense when it was introduced, but it has meant that fewer and fewer people can volunteer to be drivers, or can get their expenses back. That is because the allowable driving weight limit was set some time ago. Of course, those who drive people in wheelchairs, or something similar, around will know that those pieces of equipment have often since become heavier as more technologies are installed in them. As a consequence, fewer people than we would like are able to fill the important role of volunteer driver.

Of course, it is not only European directives that we have put into our regulation; many directives are home-grown, and they often come about in reaction to particular events. Dare I say that the “something must be done” brigade see something happen, and may react by saying, “Something must be done about it; let’s regulate to try and change this behaviour”? We all know that it is not necessarily possible to change behaviour by legislating. We can try to criminalise certain activities, but what is really important is having more positive indications of how we want people, companies and indeed our own councils to behave, rather than simply having a rule whereby they must do something.

[Elizabeth Truss (South West Norfolk) (Con)]

Does my hon. Friend agree that quite often the regulations that we are discussing have a disproportionate effect on small businesses? For example, farmers in South West Norfolk who are struggling with the natural habitats directive have had to have endless meetings with the local council, Natural England and the Department for Environment, Food and Rural Affairs to sort things out, which is a huge burden on their administrative time. Moreover, quite often, large businesses, particularly in the banking and energy sectors, lobby Government and support them in introducing more regulation, because they see regulation as a barrier to entry for smaller businesses that are trying to enter those important markets.

[Dr Coffey]

My hon. Friend makes a fair point, and on the subject of energy, the energy red tape challenge will close in less than an hour, according to the Twitter feed on the red tape challenge.

I understand my hon. Friend’s point completely. There is an interesting balance to be struck in legislating for safety by introducing regulations. I agree with her that we do not want unnecessary regulations introduced to try to keep cartels or oligopolies going. Whether it is in response to the REACH—registration, evaluation, authorisation and restriction of chemicals—directive or the herbal products directive, which we are busy trying to implement at the moment in response to European laws that have been passed, there is an argument for allowing people to make their own decisions and choices, rather than having regulation decide things for them.

I also wanted to refer to my hon. Friend’s work on child care. She has done quite a lot of policy work about the cost of child care, and how costs that have been driven into the industry mean that child care becomes exceptionally expensive for parents who want to go to work, but who sometimes cannot afford to, or for whom work seems only to pay for the costs of child care. The question is rightly being asked: what is driving that cost? Looking after children of course takes skill, but it need not take a graduate degree. Over the years, we have ended up with various regulations, leading to a situation in 2009 when two police officers were told that they could not look after each other’s children for more than so many hours at a time because, as they were not registered as child minders, the activity was deemed illegal. The Government looked into the matter, but this is another example of common sense being replaced by some bright spark’s desire to ensure that children are looked after only by child minders, rather than by their parents’ friends or colleagues.

Another issue that comes up regularly is the portability of the Criminal Records Bureau check. Someone going into a school might need five different CRB checks, depending on the activity they want to do. I know that the Government are looking into such issues but, as I said at the start of my speech, I encourage them to go much further, much faster. Not only will that help their constituents, but it will free up Government time to focus on what really matters—assisting people at home and helping businesses to grow and to employ people.

The Prime Minister is reported to have said in the past few days that he is looking for Ministers to ensure that their Bills pass the U-turn test—in other words, to ensure that there are no U-turns. Some of this is about drafting simpler legislation, but a lot of it is about not trying to regulate for every possible scenario. One of the challenges that our country has been facing—this is no criticism of the people involved—is that an openness to having everything in regulation means that measures can become a lawyers’ picnic, with everything open to judicial review. The constant desire to put everything in statute is a huge challenge, because people almost cannot turn for the risk of being taken to court or to judicial review. That is not to say, of course, that people should not have recourse to action when something is patently unfair, but we all, as Members of Parliament, need to consider whether we will end up with lawyers and judges deciding what is right and wrong, rather than Parliament deciding on that through better laws.

[Priti Patel (Witham) (Con)]

I congratulate my hon. Friend on securing the debate. Businesses, certainly in my constituency but also across the country, definitely welcome the Government’s agenda of deregulating much more, but does she agree that small and medium-sized businesses are still deeply sceptical and concerned about the constant battles they face, including legal judgments and even with local authorities, which seem to think they know best, when it is the businesses themselves that know how to get on and make the right decisions to thrive and grow?

[Dr Coffey]

My hon. Friend makes an excellent point, especially about the role of local authorities. With her pedigree in a family business and through her subsequent work, she knows about the challenges that people in our constituencies face every day. I will mention one case.

To my surprise, my local district council has responded in an over-the-top way to a deemed health and safety risk. In one part of the country, problems were identified with a commercial building’s liquefied petroleum gas tank, and that led to a measure, across the country, to investigate every such LPG tank. That led to a series of visits, and to changes having to be made. Tanks have not exploded and no risk has been identified, but the tanks must now have cages and there must be a clearing away from the site. There was also a two-page detailed submission by the council officer, essentially telling people that they had to provide details, written instructions, training, and a sign to explain how to call the emergency services, instead of allowing our local pub to use common sense: “If there’s a fire, I’ll tell you what: you just call 999.” I was told: “Well, that business might not have mainly English-speaking people working in it.” For God’s sake, let us use our common sense, so that council officers are talking to their businesses and not issuing two-page template instructions about how to dial 999.

I appreciate that setting out laws represents an ambition—a way of ensuring that we do things in a certain manner—but I encourage the Government to try to not only take the scissors to red tape, as they are already doing, but to get out the shears and really start hacking back. This is about supporting common sense and having simpler legislation. I have every confidence in the Minister, but please, let us go for as short a haircut as we can.

13:39

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I certainly need a haircut. I congratulate my hon. Friend the Member for Suffolk Coastal (Dr Coffey) on securing this debate and on her excellent contribution. In particular, I accept the argument, “Good progress, could do better,” not because I am unambitious, but because it is important to be realistic. Businesses have heard a lot of rhetoric from politicians of all parties on this issue, but the reality on the ground has often been of a lesser degree, so wanting to ensure a consistent approach has been crucial to our stance.

This issue has vexed Governments for many years—throughout my lifetime, in fact. The previous Administration had a strong rhetoric on the issue, but in the end were delivering the equivalent of six new regulations every working day, which is a daunting inheritance. As my hon. Friend rightly pointed out, the problem lies partly in that natural tension between the wider social and political agenda of any Government and how we deregulate. It is true that when a tragedy occurs—my hon. Friend alluded to this when she talked about something needing to be done—the public pressure on parliamentarians and Government can often be overwhelming, even when, looked at objectively, evidence for new laws is thin. This debate is constantly held in Government.

We as a Government have taken a different approach. Rather than find 200 or 300 regulations that we should get rid of and leave it at that, we are trying to be systematic. Our approach recognises the tension between the wider goals of any Government and the purpose of deregulation and seeks to change the very culture of Whitehall, so that regulation becomes the last resort and not the first option. To do that, we first sought to establish a system to cap the cost of new domestic regulation—the one-in, one-out system, which I will discuss in a moment. We then matched it with a systematic review of all existing regulations, through the red tape challenge, which I will update Members on in a moment.

Those policies are supplemented by an intention to sunset new regulations, to establish a regulatory moratorium on micro-enterprises—that addresses the point made by my hon. Friend the Member for Witham (Priti Patel)—and by our recently announced review of regulators and local enforcement. I will come on to that as well, because very often it is not the legislation but how it is enforced that drives the small business crazy. Alongside that domestic agenda, we have sought to reduce the burden of regulation coming from Brussels, first by ending the routine habit of gold-plating everything that comes from there and, secondly, by actively seeking an exemption from EU legislation for small businesses, and I would like to update Members on that point.

I shall look at each element, to bring the core points together and to answer some of the points raised by my hon. Friend the Member for Suffolk Coastal. Turning to new regulations, last January we introduced the one-in, one-out system to cap their cost, so Ministers have to balance the cost of new regulations by making a commensurate reduction in the existing regulatory burden. We think, as businesses have to, about the picture in the round, not just about the single measure that we have been charged with getting through Westminster. That is important, because when running a business it is not the single measure that breaks one’s back but the cumulative burden of regulations.

When we began the process in January of last year, 157 regulations were in preparation, 119 of which would have imposed a cost on business, and many more have come through the system in the past 12 months. The one-in, one-out system has had the effect of rejecting many of those measures and forcing Whitehall to change its habits, and by the end of last year, we had got to the point of only 89 new measures being agreed, only 19 of which would impose any cost on business.

In the first year—I say this with caution—one-in, one-out has started to have an impact on the flow of new regulations, although it is far from perfect. I want to ensure that the message from the Better Regulation Executive and me, as the Minister with responsibility, is clear. We have made an encouraging start, but, as my hon. Friend the Member for Suffolk Coastal rightly said, we could do better. We need to strengthen and enhance that.

There have been substantial changes in some areas. One-in, one-out has helped to get Departments to think about the picture in the round. For example, the Department for Business, Innovation and Skills has launched its own employment law review. There has been a package of changes on employment tribunals, on commissioning an independent review of managing sickness absence, which is a critical issue for business, and on launching an employers’ charter to rebalance the agenda.

We have agreed to create a universally portable Criminal Records Bureau check that employers can view online instantly, thus reducing the duplication in the process and making it easier to access. Naturally, it will maintain the minimum check that we want to ensure that children are safe, but it will reduce the ridiculous paperwork embroiled in the process.

Similarly, on health and safety, we intend to implement all Professor Löfstedt’s recommendations, which include exempting up to 1 million self-employed people from many health and safety rules designed for multi-nationals. My hon. Friend the Member for South West Norfolk (Elizabeth Truss) made an excellent point about rules being set, possibly conveniently for large businesses, that are disproportionate for the self-employed and for smaller firms.

The red tape challenge and the question of Europe are related. The red tape challenge matches the wish of the one-in, one-out policy to examine systematically what is already on the statute book. It is not easy to be exact, but we think that the statute book incorporates approximately 21,000 measures, 11,000 or so of which have a direct bearing on business. It is a mammoth task, as Members will appreciate. We intend systematically to review and cull unnecessary, burdensome or ineffective regulations.

We have grouped regulations into themes to make it easier to see the picture in the round. The website has featured 13 themes, and the Star Chamber, which goes through regulations item by item with civil servants from all the relevant Departments, has examined five themes completely. The environmental themes, to which my hon. Friend the Member for Suffolk Coastal referred, are before us at the moment. The points that she made have been mirrored in many of our discussions. I welcome her contribution. If she wants to add to it after the debate, I shall be happy to ensure that her comments are incorporated into the process.

Of the 1,200 measures that we have considered so far, more than half will be either scrapped or substantially improved. On 15 December last year, 84 defunct regulations were removed from the statute book by the House. The process in law has begun in Westminster, not just in Whitehall. To reverse the situation, we must ensure that the sausage machine is put into reverse and that we regularly remove measures from the statute book. Key measures include overhauling employment tribunals, replacing 12 sets of consumer rules and laws with a single consumer Bill of Rights, implementing a wholesale deregulation of entertainment licensing and simplifying poisons licensing. Some of the most serious poisons are on the same list as fly spray. My hon. Friend rightly described the rather crude way in which significant and minor risks are lumped together, sometimes for all the wrong historical reasons. That must be addressed, and poisons are a classic example.

We are cutting the number of different sets of food labelling regulations from a rather dazzling 31 to 17, and maybe we need to do a little more. We are removing needless energy rules that currently tie up the process of short-term holiday letting, which is important in East Anglia. We are also scrapping 80 of the 107 regulations considered in the hospitality, food and drinks sector. Those are important changes.

We have incorporated the habitat and wildlife directive into our consideration of environmental law under the red tape challenge. How could we not? However, the red tape challenge cannot rewrite set European legislation. What we can do is ask ourselves, “Are we implementing this in a minimal way and a way that is reasonable for those whom we seek to regulate? Is the information that we seek from those organisations in a form and of a scale that it is reasonable to expect them to fulfil?” It is easy for a large department of 2,000 people not to realise that a three-person business finds it a heck of a challenge to fill in endless survey forms and still earn a living.

On Europe, we recognise that we need to deal with the issue fundamentally. That is why we started last year with a new set of guiding principles. The first was to end the routine gold-plating of EU laws. My hon. Friend the Member for South West Norfolk is absolutely right that large, well-established lobbying voices can argue that it would be really good for Britain to have enhanced rules—just slightly more than the minimum standard, as they might describe it, in Europe. “It would be good, Minister,” they say, “to make things crystal clear by setting out all 74 possible circumstances in legislation. That would be really helpful. Clarity would be brought.” That is the natural argument presented.

To prevent that, we have put in place a principle saying that the default position is that we will simply copy what is in the agreed directive into UK law unless that would clearly affect UK interests adversely. That is a fundamental shift from the default position. It does not mean that no measure will ever be gold-plated, but it does mean that the Minister in question will have to bring it before their Cabinet colleagues to justify why. That is an important deterrent.

We also need to go back further in the policy-making process in Europe. That is why, last March, the Prime Minister wrote to President Barroso and Herman Van Rompuy, the President of the European Council, calling for new burdens on business to be offset by savings elsewhere. Members can see that the principle of the cumulative burden has been introduced. Since then, we have secured a commitment from the European Commission to reverse the burden of proof when including micro-businesses in the scope of EU legislation. The EU must justify why a micro-business should be included, rather than assuming that it should. That is an important first principle. To illustrate, we have agreed with EU Ministers to exempt micro-businesses from certain EU accounting rules. We think that that will save UK small businesses approximately £150 million to £300 million in annual costs. That is an important shift, and it sets a precedent. Once it is seen that that can be done in that field, there is no reason why it cannot be explored elsewhere.

It is not just the Commission or the Council with which we must concern ourselves; often, it is also the European Parliament, where there are also strong voices similarly in favour of saying “Something must be done.” That is why, working with Members of the European Parliament across the coalition, we have secured the European Parliament’s agreement that it will conduct independent impact assessments on its substantive amendments. It has also set up a specific unit to consider that work. In other words, when a measure is introduced, the European Parliament can now say, “Hang on a moment. What will that cost?” The cost can be judged independently. That is an important start, although we need to go a lot further. Now that we have those matrices, the next step is to ensure that they are implemented.

In conclusion, rather than just finding 50 popular measures to get rid of and leaving it at that, we have tried to address the root problem. During the next week or so, I will set out for the House the details of what we did in 2011, so that people can see measure for measure, item for item and cost for cost exactly what has gone, what is going and what will stay. Over the past 12 months, we have sought to turn the oil tanker around, change direction and ensure that we not only cap the cost of new regulation and reduce the burden of existing regulations, but tackle the burden of EU regulations and how the UK implements them. Together, those things will make a good start, but as my hon. Friend the Member for Suffolk Coastal rightly said, we recognise that there is much more to be done.

Question put and agreed to.

13:59

Sitting adjourned.