Business Deregulation

Speech by Malcolm Bruce MP delivered to UK parliament on Wed 30th Jun 2004

Business Deregulation

House of Commons, 30th June 2004

Perhaps we should all acknowledge that regulation and deregulation is a difficult area.

Often, when businesses complain about regulations and are asked to spell out how we should deal with them, they are unable to be specific or they cite regulations that we would not want to get rid of. For example, the chambers of commerce include in their deregulation proposals the asbestos regulations, but we know we must deal with those.

We should all recognise that we need better regulation and, yes, less regulation.

The Minister mentioned the Better Regulation Task Force, and she is entitled to take comfort from its proposals that are supportive of the Government.

However, there are other proposals from the taskforce to which she did not refer, but which contain a mechanism that is valid—that we should apply a principle of new for old. In other words, new regulations should lead to the termination of old regulations, there should be an attempt to limit the number of regulations, and wherever possible, regulations should have sunset clauses so that they expire. If they have to be renewed, they have to be rejustified and the debate is reopened.

We welcome the fact that the Prime Minister has said that it will be a priority for the UK presidency of the European Union to promote deregulation. We on the Liberal Democrat Benches will watch with interest to see how the Government take that forward, and we would be willing to feed constructive suggestions into that process, given that European regulations account for 40 to 50 per cent. of all regulations in the UK, as the Better Regulation Task Force identified.

The Government's track record has not been fantastically successful on some of the more important EU regulations. The Government have tended to come in late and try to resist the regulations, rather than being an organic part of the shaping of them. I cited in our amendment the directive on fridges, end-of-life vehicles and electrical and electronic goods.

On that point, the Table Office would not allow me simply to say that we were concerned about the fridges regulation, but required me to refer to:

"the chaos of the UK application of European Council Regulation No. 2037/2000 requiring the removal of ozone-depleting substances from refrigeration equipment".

The Table Office required two lines in place of the word "fridges", which may be indicative of an attitude of mind that pervades the House and is perhaps shown by some civil servants. We need to accept simpler expressions.

While I am on the subject of regulations, it is interesting to note that when EU regulations are being translated into British regulations, usually through the House and statutory instruments or other mechanisms, an analysis has shown that the UK has on average 334 per cent. more words than the second most wordy member state in the EU. In other words, all our regulations turn out to be infinitely longer than those that apply in any other member state.

It does not follow from that that we are necessarily more regulatory; it may be that we are more explanatory. But it suggests that there is evidence of our adding detail to regulations, which our competitors in other member states do not do, and that needs to be considered carefully to ensure that we are not loading burdens on ourselves that the EU does not require us to.

Ministers should be pretty watchful of civil servants who see some of these regulations as an opportunity to piggyback some of their favourite schemes that they were never able to get past Ministers when they were free-standing proposals for domestic legislation. That is a serious issue, and one reason why we need to deal positively and proactively with regulations.

Conservative Members' difficulty is that they have a general opposition to regulations and a general complaint that they add costs, but they are much less able to specify which regulations should be got rid of. That is not a cheap gibe. All of us would genuinely like to find ways to simplify regulations or to get rid of those that do not work. It behoves Conservative Members to come forward with specific proposals.

We need practical proposals, and we need a mechanism for ensuring that they are properly evaluated. All of us have an interest in that. The question we need to ask ourselves is, given that a certain amount of regulation is required domestically for health and safety matters and even legitimate social matters, and for other reasons, and there are EU regulations that have to be incorporated into domestic law, how do we do that more simply and cheaply than we are? We all have an interest in bringing that about and we all need to ensure that the mechanisms are improved.

Looking back on the Conservative Government's record, I can find just as many quotes from the latter part of the 1990s complaining about Government regulations and the difficulties faced by businesses struggling with all those regulations.

As Home Secretary, the Leader of the Opposition introduced the immigrant workers requirement, which put an obligation on employees to be responsible for finding out whether anybody whom they employed was an illegal immigrant. The onus was on them to prove otherwise. That was a pretty mischievous measure in every sense, and it was very burdensome. I remember that employers complained bitterly about it, but the Minister who was responsible for the policy is now the Leader of the Opposition who says that he does not think that businesses should be overburdened with unfair and unreasonable regulations.

Liberal Democrat proposals for abolishing the Department of Trade and Industry are of course controversial, but we genuinely believe that there is a strong case to be made. Historically, the Department existed partly because we had a major manufacturing base and partly because there was a very large publicly owned sector.

We have now privatised most of those businesses, and while there are regulatory responsibilities, there are no longer direct investment or management responsibilities and the manufacturing industry has declined.

In passing, I should say that I share the concerns about manufacturing, as I believe that an economy of the size of that of the UK needs a manufacturing component in order to be balanced and effective. Two issues need to be recognised. The first relates to the great days of Mrs. Thatcher, who I think is on record as saying that she did not care whether it was goods or services, as long as they added value. Secondly, we have to be realistic about the world in which we are operating and look at what is happening in China, India and the new Europe. It is very difficult to maintain a competitive manufacturing industry unless it is at the cutting edge, but it is not all bad news. Although we may be losing jobs, we are not losing business in all cases, as we are maintaining some core leading-edge businesses. Some of the jobs may not be great, but the added value is still significant.

Without the sort of direct Government input to which I have referred, do we need a Department that has a budget in excess of £6 billion and a staff of more than 10,000? Our conclusion is that not only do we not need the Department, but it is instinctively regulatory and is cumbersome and bureaucratic. There is an infinite variety of taskforces and working parties. I am not suggesting that nothing that comes out of them is of any value, but I have talked to many businesses that have concluded that many of the activities in which they are engaged are a substantial waste of their executives' time.

One major company—I shall not name it—told me recently that it has now said that it will not send executives to such discussion groups at the Department, because it does not feel that doing so serves any useful purpose. The company said that it used to send people to the meetings partly because it hoped that something constructive might be achieved, but more out of a fear that if they did not go, its competitors would gain an edge.

That is one of the problems with many of the business assistance schemes, although it is interesting to see how the debate is developing. I saw a rather ironic article in yesterday's Financial Times suggesting that Digby Jones was about to launch a campaign of business men for bureaucracy, which would be battling to save the bureaucrats of the DTI on behalf of the business community, whereas it said that the Liberal Democrats were keen to get rid of them. That was a slightly ironic juxtaposition.

Many businesses say, "The process of applying for regional selective assistance or any other form of grant is long drawn out, cumbersome and time consuming. We may have to employ private consultants to make the case effectively, and we may not get the money in the end." Many other businesses complain that the money goes to their foreign competitors, which set up in this country and compete with British businesses that do not have access to the same grants.

We conclude that it would be better if none of those schemes existed, in which case people would not have to waste time bidding and could get on with running their businesses in a competitive environment.

If such activity has a role, it is in the regions, where the business community, councils and regional development agencies have local knowledge and understanding and, given more flexibility and less central control, might deliver a better result. That is our case, which is worthy of serious consideration. We accept that it will be criticised, but we do not make it lightly, because we have thought it through and discussed it widely.

A deregulation Minister should be appointed, with specific responsibility to examine all regulations and ask, "How can we do without them, simplify them, get rid of them, apply a sunset clause or exchange them for new regulations?" Such an appointment would not get rid of all regulation, but it would have a dynamic, because lower, lighter and better regulation would become an active, rather than reactive, process.

With regard to European regulations, many of the single market regulations benefit business. If there were no single market, single market regulations would not exist, and we would need to develop products to meet the requirements of every member state, so every product would need 25 specifications to satisfy all the markets within the European Union. The single market regulations fit all countries, which must be beneficial.

That does not mean that the regulations could not be simpler, better or fairer, but they must exist if the single market applies.

We have taken evidence from Norwegian and Swiss businesses, which say, "The reality is that we must accept those regulations willy-nilly if we want to trade with the European Union," which they do, "but we have no say in shaping them and arguing our case, other than by bilateral discussion with the European Union." Switzerland has major food companies, pharmaceutical companies and industrial companies that trade across the European Union.

The honest truth—this is an interesting point that Conservative Members should engage with and, if they are genuinely in the debate, will engage with—is that many in the business establishment in Switzerland are seriously concerned about Switzerland's detachment from the European Union. Their personal nightmare is Turkey becoming a member of the European Union while Switzerland is not, which would not be in the Swiss national interest.

As long as regulations in the single market affect businesses in the United Kingdom, an early, proactive intervention to help shape regulations and to argue the British case is far better than leaving an empty chair.

The Conservative Government were not present to argue the case, and the UK had to accept the outcome at the end of the day. That policy did not serve the national interest then, and it will not serve it in the future.

It would perhaps be better if all hon. Members acknowledged that regulation and deregulation are complex issues, and that none of us has the complete right answer. It is unreasonable to pretend that we can sweep away a load of regulations with no downside effects.

At the same time, we should never be complacent. We need to find mechanisms to get rid of unnecessary regulations, to make regulations that are justified and renewed through sunset clauses, and to play a proactive role in reducing and simplifying regulations as much as possible. I maintain that a smaller Department for deregulation instead of a large Department for dreaming up new regulations would be in the better interests of British business.