Draft Economic Growth (Regulatory Functions) Order 2017 Draft Growth Duty Statutory Guidance

Margot James Excerpts

Tuesday 28th February 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft Economic Growth (Regulatory Functions) Order 2017.

[The Chair]

With this it will be convenient to consider the draft Growth Duty Statutory Guidance.

[Margot James]

It is a pleasure to serve under your chairmanship, Mr Brady.

The order will support regulatory bodies in the UK in creating a healthier business environment by making regulation more proportionate, transparent and accountable. The Government are committed to ensuring that regulation supports growth and does all it can to unlock productivity in the UK. Better regulation is central to the Government’s desire to make the UK the best place in the world to start and grow a business, and a key part of our commitment to driving economic growth and boosting productivity. The Government delivered savings of £10 billion to business over the last Parliament, and we have committed to achieving a further £10 billion of deregulatory benefit for UK businesses in this Parliament through our business impact target.

In the Deregulation Act 2015, we introduced a duty for regulators to

“have regard to the desirability of promoting economic growth”—

the growth duty. Alongside the business impact target, that duty supports a positive shift in how regulation is delivered. It will help to reduce the regulatory burdens that hold businesses back and prevent them from getting on with doing business. The result will be another step forward in ensuring that regulation supports growth by freeing up businesses to innovate, creating greater prosperity and opportunity for all.

The 2015 Act establishes the economic growth duty as a legislative requirement for persons exercising a regulatory function. The draft order sets out the specific regulatory functions to which the duty applies, and the statutory guidance has been produced alongside it to assist regulators in fulfilling their new responsibilities at both strategic and operational levels.

Proportionate delivery of regulation plays an important role in supporting competitive markets and improving social and environmental outcomes. Regulatory enforcement that is not proportionate and risk-based imposes unnecessary costs on business, creates uncertainty and undermines investment. How regulation is enforced can have significant effects on businesses’ ability and willingness to invest and grow. In particular, there is evidence to suggest that some regulators fail to take sufficient account of the economic consequences of their actions and place unnecessary burdens on businesses in the exercise of their regulatory functions. To address that, in the 2012 autumn statement, the then Chancellor announced several measures designed to create a healthier business environment by making regulation more proportionate, transparent and accountable.

[Bill Esterson (Sefton Central) (Lab)]

The Minister refers to what the then Chancellor said and mentions that some regulators have not acted supportively for business and economic growth. Will she give an example of a regulator or a case in which that is supposed to have happened?

[The Chair]

Before the Minister resumes, let me say that because the Question has not been put yet, it is not technically possible for her to accept interventions. Of course, whatever the Minister says now is entirely up to her, but it is important that the Committee should be aware of the appropriate rules of order.

[Margot James]

I am extremely grateful, Mr Brady, as I am sure the shadow Minister is, for that point of learning, which was not enforced yesterday.

I will not comment on individual regulators, but I see from time to time examples where regulation is applied without sufficient concern for the ways of working in particular sectors. If those regulators were more sensitive to the ways of working, they would apply the regulations to no less effect and with less imposition on the companies concerned.

Although many regulators consider the impact of their actions on economic growth, some do not. Indeed, some regulators think they are unable to take account of growth because they do not have a statutory requirement to do so or their statutory objectives do not refer to growth. Requiring regulators to have regard to economic growth in this way will address the uncertainty of regulators that feel at the moment that they cannot have regard to economic growth and will put the obligation on a statutory footing, thereby complementing regulators’ other legal obligations.

The growth duty will help regulators to carry out their functions in a way that is conducive to economic growth, and will ensure that regulatory action is taken only when needed and that any action taken is proportionate. It will therefore encourage regulators to develop more mature and productive relationships with the sectors and businesses that they regulate, driving up the accountability of regulators to the business community. That will help to deliver our aspirations for greater productivity and growth in the economy.

Public consultations were carried out in 2014 and 2015, and there was a further consultation on the scope of the business impact target. Responses were received from a broad cross-section of stakeholders. The majority of respondents to the consultation on the growth duty agreed that regulators should have regard for economic growth and should be accountable for whether they have properly considered business growth in their decision making. One respondent said that

“businesses need to have proportional regulatory burdens that can be monitored and dealt with efficiently so they can focus on growth.”

Another stated that

“regulators should always have a dual responsibility to regulate and to promote economic growth…the two should not be mutually exclusive.”

There were a small number of objections to the inclusion in scope of particular regulators. Those were mainly based on arguments related to the amount of regulatory activity undertaken or the fact that the organisation did not have any regulatory functions.

Having considered those responses, the Government are satisfied that it is appropriate to bring the regulators listed in the instrument within scope of the duty. This measure is an important step towards creating a healthier business environment by making regulation more proportionate, transparent and accountable. I commend the regulations to the Committee.

[Bill Esterson]

rose—

--- Later in debate ---

[Margot James]

I thank hon. Members for their questions. Both the hon. Member for Glasgow North and the shadow Minister discussed the nature of regulation and I think there is some agreement—I would hope so anyway —that we are about better regulation, smarter regulation and regulation that is appropriate to the sector of society or the economy it is attempting to regulate.

I would like to put on record the fact that the notion that the Prime Minister was espousing some alternative for this country—its being, as the shadow Minister mentioned, a low-wage tax dodgers’ country on the edge of Europe—is the absolute antithesis of her aspirations. The notion of regulation is very important to the industrial strategy. We want to achieve a state where the regulators have a responsibility, as do all sectors of the economy and businesses operating within it, to support the economic growth that we all depend on. The shadow Minister said surely they were doing that already. Many do, and that is a good thing, but because they do not have a statutory obligation to ensure they have a duty to promote growth alongside their other responsibilities, some of them are not aware of it or, worse still, some think they do not have to do so. That is the purpose of the measure, and the response of the Federation of Small Businesses was that it would be a good thing if all regulators realised they had a responsibility to promote growth where appropriate. [Interruption.] Does the hon. Member for Sefton Central wish to intervene? I get a sense that he does. I am quite happy to give him the floor.

[Bill Esterson]

It is baffling, Mr Brady. The Minister has said twice that there is concern about regulators that are not promoting growth, but she is not giving us any examples. Without a proper evidence base, it is extremely troubling that the Government are doing something that does not stack up, that lacks the support to say that it is needed. Just one example, please—that is all we are asking for.

[Margot James]

I am not going to name individual regulators. The hon. Gentleman can read the consultation that lies behind the introduction of this regulation, from which I am sure he can get a feel for the sectors that are in need of this duty.

Talking in the abstract, we want to see regulators providing more proportionate decisions; we want to see a reduction in administrative burdens, inspection costs, duplication of information, and reliance just on external contractors. Businesses do not want to feel that regulators are faceless bureaucrats, but that they are approachable and supportive of their overall success. Some regulators are better at that than others. The purpose of the measure is to try to bring the rest up to the standards of the best. For more detail, I urge the hon. Gentleman to read the consultation.

Turning to other matters that the hon. Gentleman raised, he cited the Olympics as a regulatory success, and contrasted them with the financial crisis. He said there was not enough regulation to deal with that and the fact that, in his words, “all parties were on the side of less regulation.” I do not think that was the case. As my hon. Friends have pointed out, there were 6,000 pages to regulation at the time. The root cause of the problem was not the lack of regulation, it was the impossibility of enforcing those regulations, and the fact that there were too many regulators with a finger in the pie.

We want to see regulators balance their regulatory purpose with their duty to promote growth. The hon. Gentleman was concerned about legal challenges and the imbalance of power between large companies and relatively lightly resourced regulators. While, in principle, it is possible for a legal challenge to be brought, the statute and the regulations require that regulators have regard to the desirability of promoting economic growth. Providing a regulator does so, a legal challenge would fail, so there is no real prospect of a court being asked to consider the particular balance being struck by a regulator. That balance is up to the regulator and if they have good reason for their decision—if they have considered their duty to promote economic growth but concluded that, on that occasion, it is trumped by another of their other duties—they will merely have to demonstrate that reasoning. I hope that that reassures the hon. Gentleman.

The growth duty is a key element of our agenda to improve regulation in the UK, and these regulations will support a positive shift in the way in which regulation is delivered by reducing the unnecessary burdens that hold business back and prevent them from getting on and doing business. They will therefore help to ensure that regulation supports growth, and will create a healthier business environment by making regulation more proportionate, transparent and accountable.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Economic Growth (Regulatory Functions) Order 2017.

Draft Growth Duty Statutory Guidance

Resolved,

That the Committee has considered the draft Growth Duty Statutory Guidance.—(Margot James.)