Economy: Growth

Lord Hodgson of Astley Abbotts Excerpts

Thursday 6th December 2012 Lords Chamber

[Lord Hodgson of Astley Abbotts]

My Lords, in the three minutes available to me, I begin by congratulating my noble friend on his remarkable tour d’horizon and its 89 recommendations. I want to focus on just two issues: the malign impact of regulatory overlap, in his recommendation 44, and the role of the Government as a commissioner and purchaser in recommendations 36 and 37.

First, on regulatory overlap, during the two reports that I have done for the Government, in particular Unshackling Good Neighbours, which focused on the regulatory burdens on smaller firms, charities and voluntary groups, it became clear that there is a great tendency for regulators to take in each others’ dirty washing. Ofsted asks about the frequency of testing electrical appliances, the Charity Commission about CRB checks. Both those issues are very important, but they are the subject of separate statute law and have their own enforcement procedures and authorities. Firms, especially smaller ones, are vulnerable to repeated questions about whether they have checked this or that—questions that very often are not set in context, do not need to be asked and are not accurate. They leave the firm feeling that, to be on the safe side, everything should be checked. As a result, the default option becomes, “If in doubt, check everything”. Per contra, if my noble friend’s ambitions are to be realised, we need more judgment and less process.

On commissioning and purchasing, of course we have to ensure value for money for taxpayers, but purchasers and commissioners need to consider how many tenderers need to be invited against the size of the contract. There can be only one winner, and the economic frictional costs of many losers are considerable. Purchasers and commissioners also need to consider the cost of tendering in relation to the value of the contract. In Unshackling Good Neighbours, we suggested 2% of the value of the contract up to £500,000 and 1% thereafter. When a service is being provided, commissioners also need to consider the annual cost to the provider of the monitoring. Again, we suggested 4% up to £500,000 and 2% thereafter.

Further, commissioners should not change their methods of measurement midstream. To do so adds exponentially to the costs of SMEs. All this may appear very nitty-gritty but, unless the Government are able to agree centrally and locally and stick to some performance yardsticks, much of the potential benefit of their purchasing power will be dissipated.