European Communities (Deregulation) (Hansard, 4 February 2004)

§ Mr. Jonathan Djanogly (Huntingdon)

I beg to move, That leave be given to bring in a Bill to make provision in respect of the effect on persons and businesses of regulations made under section 2 of the European Communities Act 1972. It is a recurrent complaint by members of the United Kingdom business community that the burden of compliance with regulations of all kinds has worsened in recent years, and that that acts as a major impediment to profitability and competitiveness, especially for smaller businesses. The Bill is intended to introduce a new procedure in relation to regulations introduced pursuant to European directives.

In presenting the Bill I acknowledge the sterling work previously carried out by my hon. Friend the Member for Cities of London and Westminster (Mr. Field) in presenting a similar Bill last year and the work that has been done by Sir Paul Judge. This has long been an issue on which he has campaigned.

It has to be said that not all regulation affecting business is down to Europe. Examples of recent UK-inspired legislation affecting business in a significant way include the climate change levy and the aggregates tax. Those are very much creatures of our Government's devising. However, excessive European legislation has become a growing political issue in the UK, where the CBI, the Institute of Directors, the British Chambers of Commerce and the Corporation of London, to name but a few, have all been heavily critical of the way in which rules are being applied, particularly without due regard to the cost of their implementation.

The shadow Secretary of State for Trade and Industry pointed out in his recent comments on the Employment Relations Bill that under this Government as many major EU directives have been implemented in the UK as during the preceding quarter of a century of our EU membership. However, no matter where those regulations are coming from—whether Europe or Britain—what matters is the significant impact that they are having on business.

A Huntingdon constituent of mine who owns a business recently received a letter from a solicitor. In the letter, the solicitor explained the recent legislation introduced by the Government but emanating from the European social chapter, to give employees more rights in relation to parental leave and flexible working. The solicitor explained how this meant more work, more bureaucracy and greater costs for the employer. He went on to paint an alarming picture, saying that if my constituent did not follow the new rules, she would be in breach of the law and may be taken to a tribunal by her employees. Unsurprisingly the solicitor concluded the letter by offering her his advice.

It can be seen from that example that we are creating a new industry for lawyers and a feeling of being oppressed and victimised for employers. Although in piecemeal terms these regulations may look attractive to employees, those same employees need to realise that we are losing our hard-won competitive advantages, at the cost of seeing our factories move to China and our call centres and settlement businesses move to India. The figures clearly show that it is not just a question of British business moving abroad; foreign business is also choosing not to invest in this country.

765 It is estimated that the Government introduce some 3,000 new regulations a year. The British Chambers of Commerce, in its ongoing quantitative assessment of the burden of regulation, suggested that the total cost of regulations imposed on business since 1998 is now more than £20 billion. The Government's own Better Regulation Task Force estimates that European legislation now accounts for more than 40 per cent. of significant new regulatory proposals in Britain.

The Economist, in an article of 15 November last year, said that company bosses are increasingly condemning the flood of European directives, which are made even more stringent when turned into British law and regulations, and then applied relentlessly. Business also points out that this is not the case in all other competing EU countries. One source quoted in The Economist article contrasted the stern safety regime in a now-closed midlands tractor plant with the way in which workers wandered over a moving assembly line in a sister plant in France.

In September 2003, the Better Regulation Task Force blamed cultural inertia among Whitehall civil servants for frustrating attempts to reduce red tape. An expression that Members will be very familiar with in this context is "gold-plating". This seems to be a phenomenon particularly associated with the UK, illustrating the fact that eager civil servants, in their attempt to codify standards laid down by European directives, go far beyond the minimum standards required by European legislation. Indeed, that frequently happens even when such standards do not have to be separately implemented by British legislation, as they originate from EU regulations that are legally binding in this country in any event.

The British Chambers of Commerce has set out the recommended key action points to which the Government need to commit in order to stem the tide of regulation. They include using regulation only as a last resort in business-related policy, providing greater transparency in respect of the cumulative burden of regulation on business, introducing sunset clauses into all new regulations, and investigating fully and regularly the operation of existing laws.

The current Government have announced at various times that they will look into regulation, but never to much avail. It is important to realise that on its own, a deregulatory approach cannot reduce, or is very unlikely to reduce, the net amount of regulation, because regulations are continually being produced at a faster rate than they are being reviewed.

766 The Bill that I am proposing today is designed to close this gap by introducing the right for businesses, individuals and public bodies alike to seek a declaration by the courts that UK regulations enacted under section 2 of the 1972 Act are ineffective, to the extent that their provisions go beyond the basic minimum required by Community law, first, where UK regulations contain burdensome regulations that are not required by Community law; secondly, where other member states have not implemented certain provisions of European law; or thirdly, where other member states have implemented such provisions in a less burdensome way. Such a declaration could be applied for by affected individuals or businesses in the administrative courts, as well as in any civil or criminal proceedings through which a person is prosecuted or sued for breach of such a regulation.

These proposals would force policy-makers and civil servants to monitor closely what is going on in other member states and their laws. They would also encourage Members to take a somewhat greater interest than I have often found to be the case in what is going on in Brussels legislation. This increased review and co-ordination would, in turn, avoid the current nonsensical situation whereby the UK almost always adopts the lowest common denominator in its interpretation of European law. Any legislative provisions going beyond the minimum required by European directives should be implemented using the usual parliamentary legislation procedures, rather than their being shuffled in through the back door, in the form of statutory instruments, under section 2(2) of the 1972 Act.

For all those reasons, this new legislation would be an important step towards relieving UK business of the burgeoning morass of European red tape by providing for an effective procedure through which businesses and people could challenge uneconomic over-regulation that is unfairly imposed on them. In allowing this, the Bill will go some way towards revitalising the confidence of the British people in the powers of this House, and accordingly in the democratic integrity of our nation.