Enterprise and Regulatory Reform Bill

Lord Sheikh Excerpts

Wednesday 14th November 2012 Lords Chamber

[Lord Sheikh]

My Lords, this is a most important and welcome Bill. The Queen’s Speech which promised this Bill enticed us with the words that the Government would,

“create the right conditions for economic recovery by strengthening the business environment, reducing regulatory burdens and improving business and consumer confidence”.

A clearer and more precise definition of the mission for the Government would be hard to find, and this debate provides us with a good opportunity to pause and reflect, not so much on what we have done to date, but what we need to do now to lay the foundations for our future economic well-being. The Government’s record on the macroeconomy has been hard-fought, but we are certainly making tangible progress. As we nudge ourselves out of recession, it is vital that we provide businesses with the tools they need to strengthen the path to recovery. Addressing the microeconomic challenges will enable businesses to make their contribution to our prosperity. As someone with a long career in business, I welcome the Government’s commitment to regulatory reform, but too many important stakeholders such as the CBI and the Institute of Directors have been critical that action has not met rhetoric. However, this Bill provides us with a clear opportunity to provide them with the reassurance that they seek. Business confidence is a crucial element in our strengthening economy.

One of the most important factors which has undermined our commercial environment has been the ebb and flow of confidence of both consumers and businesses. A stable and predictable regulatory environment is important, as is one that delivers the right balance between affording an appropriate level of protection while not obstructing innovation and enterprise.

Consumers need to have confidence to spend and businesses need to be able to find their customers. Small businesses are at a relative disadvantage in the regulatory environment. They are not able to afford large teams dedicated to monitoring compliance, and the proportion of staff time dedicated to regulations is greater than for larger enterprises. Some estimates suggest that the impact of regulations is 30 times as great for a small business as a larger company. Measures in this Bill will take action to address that, which will be most welcome to businesses of all sizes.

I welcome the commitment in the Bill to make it easier for sunset clauses to be included in secondary legislation. I commend the increased use of sunset clauses in regulations. They are very popular with businesses and ensure that regulations that do not meet their objectives have a natural time limit.

The red tape challenge has been broadly welcomed across all sections of our economy and has achieved a great deal to make life easier for businesses, with more than half of the regulations considered to be improved or got rid of. I acknowledge that this Bill provides the first legislative vehicle to deliver on the deregulation that the red tape challenge promises.

We also need to do more on the potential problems caused by excessively obstructive employment legislation. Small businesses can be very anxious about taking on extra employees, but we should want them to feel comfortable in accommodating growth. Most businesses start small, and I know from my own experience that corporate growth increases confidence and improves a company’s contribution to the wider economy. However, many small businesses fear that one mistake on the employment front will affect their business, distracting their focus while they deal with the consequences. Employment law is a minefield, which puts off many small businesses that cannot afford a dedicated human resources department. Making sure that the balance between employee protection and business efficiency is not easy, but I believe that this Bill strikes the right balance.

It is in everybody’s interest that workplace disputes are resolved swiftly. One of the companies that I previously chaired was recently involved in a dispute with an employee. The proceedings were lengthy and acrimonious but the complaint was not justified and the case was decided in our favour eventually. ACAS acknowledges that problems at work can be a barrier to growing a business. The Rapid Resolution Service should increase efficiency, with cases dealt with more effectively, thereby avoiding significant legal fees or the need to attend a hearing.

I also welcome the measures in the Bill that seek to address competition policy, improving the robustness of decisions and strengthening the regime. I support the competition authorities taking forward the right cases, to increase the speed and offer other improvements for businesses. I support the new Competition and Markets Authority, which will dispense with the duplication that currently exists between the OFT and the Competition Commission. This will result in efficiency.

Markets serve the interests of consumers and ensure that the best businesses thrive. Where market forces fail to deliver, it is right that competition authorities step in to act. However, when they do, the investigation can take an incredibly long time to complete—sometimes more than 30 months. By any measure, that is too long and I welcome the provisions in the Bill that will impose time limits on these inquiries. The establishment of a single competition authority should prove an efficient response to this challenge.

I also welcome the proposed changes in some powers and duties of the Equality and Human Rights Commission, and the proposed amendments to the Equality Acts of 2006 and 2010.

Another area where the Bill offers positive prospects for business is in the provisions relating to the Green Investment Bank. I care about the environment; in fact, my maiden speech in your Lordships’ House was on this subject. Increasingly, the world is embracing the importance of low-carbon solutions to our problems. The Bill defines the “green purposes”, but investors are looking for certainty in this area. I congratulate the Government on investing significant sums of money in the Green Investment Bank and I hope that they will allow the bank to borrow further for its well-being in the future. I applaud the fact that the bank will have independence.

I shall make a few observations about the provisions in the Bill relating to directors’ pay. It is right that shareholders should have a say in how a company is run, but we need to be careful that these measures do not lead directors to err on the side of caution at the expense of economic growth. Encouraging shareholders to take a close interest in the performance of their companies is a good thing, but pay should reflect performance and we must be careful that these provisions do not result in shareholders micromanaging as an unintended consequence. I hope that my noble friend the Minister will let the House know how the correct balance will be achieved between improved levels of engagement between companies and shareholders, and the risk of directors being pushed away to less restrictive economies.

As someone who believes in competition, I welcome the clauses relating to cartels. I also welcome the proposals relating to health and safety duties, as these will help to avoid unnecessary civil litigation. In this regard, I declare an interest in that I chair an insurance brokering and underwriting organisation.

This important Bill comes at a particularly critical time for our economy. The needs of businesses are very clear. They want a simple, predictable, reliable and agile regulatory environment. We should do everything that we can to encourage entrepreneurs to start and grow businesses in this country. We need a competition regime which champions competitiveness and opportunity. These are tough asks, but I believe that this Bill will measure up and meet the challenges.