§ 6.2 p.m.
§ Lord Vinson rose to call attention to the unintended consequences of regulation; and to move for Papers.
§ The noble Lord said: My Lords, none of us here today is against sensible regulation. The object of this debate is in no way to prevent regulation but to try to make certain that we can create a regulatory framework that is, above all, proportional to the mischief that it attempts to correct, and is applied intelligently and realistically. Should it have consequences that were not intended or anticipated at the time at which the regulation was introduced, at least it is rectifiable so that overall it does as it was intended to do—more good than harm.
§ In that aim I am sure that we would be supported by those many inspectors and officers whose task it is to interpret and execute often ill-drafted and ill-considered laws that they know in their heart of hearts are inappropriate. They, too, want better regulation.
§ Throughout this debate I expect that we will hear many horror stories of where regulation appears to have gone wrong and where European Union legislation, in particular, appears to have been gold-plated as it is interpreted into English law.
§ It is perhaps not widely understood, but the whole basis of continental law is very different from our own. Broadly, under British common law everything is allowed except that which is disallowed. Here the law is enforced mandatorily. Under European law, broadly 281 nothing is allowed except that which is allowed, so in order to make a law workable—because it virtually covers everything—it must be interpreted flexibly. It is often framed in a way that is broadly indicative; so much so that our lawyers find that unsatisfactory and hence tighten the meaning when drafting it into English law. It is thus so much harder for our law enforcers to exercise a sense of proportionality than it is for their continental equivalents.
§ That point could be met if, when drafting laws, we state that their interpretation should likewise be exercised proportionately and realistically. The problem is that through successive EU treaties, and the associated treaty of human rights, an ever-tightening network of restrictions and regulations has been constructed that inhibits common sense and adds unnecessary costs.
§ A timely example is the review of the Working Time Directive. I see no clamour from the workforce for more than the existing voluntary arrangements where most people can choose to work what overtime they wish in a free country. The unintended consequences of a mandatory short week would not be to keep people in jobs but rather to deny them. It is essential that we keep the opt-out and do not narrow its definition.
Overtime in all businesses is the essential mechanism that helps to bring supply and demand together. Existing staff can work overtime to meet peaks in demand. If that demand continues then at that point the firm reduces overtime and takes on new staff. Without overtime it loses custom. The unintended consequence of a mandatory shortened week would be a rise in unemployment, particularly in youth unemployment, exactly as has happened in France. Earlier this month the problem was recognised by the Dutch Deputy Prime Minster, who said that Europe's economic growth can be raised only,
by lining the myriad of [regulatory] barriers",
that the enterprise sector is tied down by red tape".
We are not alone.
§ It is for that reason that regulatory impact assessments (RIAs) are so vital. However, many of them carry little conviction because the department attempting to carry them out in a hurry turns to the easiest source—very often, the regulatory authority that is to apply them. That is like asking a barber if you need a haircut. If the impact assessments are to fulfil their purpose, time must be taken to consult, in particular, smaller firms and businesses, where the real impact will be felt.
In another place Mr Archie Norman MP is introducing the Regulatory Impact Assessment Audits Bill, the very sensible purpose of which is to try to make certain that RIAs have been correctly done by an impartial body. As often as not, they are regarded as a chore by the department concerned, produced grudgingly and, to quote the Social Market Foundation report,
crafted with as little information as possible".
There is a pressing need for impact assessments to have an ex post proper validation to restore confidence in the process.
In the first place we introduce too many laws. Over the past few years there have been 27,000 items of legislation covering 97,000 pages of instruction. It is never wrong to be reminded that Dean Swift, in his allegory Gulliver's Travels, was attempting to tackle the same problem. He said of Gulliver:
No one silken thread held him down, but a thousand made him immobile".
We need to start cutting those threads.
§ The economic cost to this country is enormous. The British Chamber of Commerce has estimated that £20 billion worth of extra regulatory costs were placed on organisations over the past five years. But the problem is not just one of making more appropriate regulation but also of unscrambling existing regulation where it has become inappropriate. In particular, it is difficult to unscramble safety legislation; one can be so easily accused of not caring whether somebody is killed or injured.
§ In our safety-ridden society we are advised that decisions are best based on the precautionary principle. In effect, that enables any authority to abandon the concept of risk assessment and balanced judgment based on proportionality. Precaution is so much easier to justify than proportion. The avoidance of risk does not have to be justified, because who can be brave enough to challenge publicly the concept of putting safety above all else? Thus the precautionary principle stifles rational scientific debate regarding the nature of risk and is often nothing more than the cloak for intellectual cowardice.
§ A classic example is aircraft lifebelts. I have checked and found that not once in the past 25 years had lifejackets been fitted prior to an accident on a passenger aircraft. Even if they had been, I doubt whether they would have had much practical good, because a jumbo jet hitting the water at any speed would disintegrate and sink rapidly. There is an inherent risk in aircraft—thank God they have a fantastic safety record. The demonstration fitting of lifejackets does nothing, except perhaps to comfort passengers or to cause them concern. Nobody has yet had the courage to suggest that that useless safety charade should be discontinued.
§ At the other end of the over-regulatory scale, Sir John Stevens was prosecuted when one of his constables was injured while chasing a criminal across a roof. Our police chief was forced to waste weeks of his time defending a case that the judge subsequently said should never have been brought. The unintended consequence of this action was that the real criminal problems of this country did not get the attention that they deserved. More damagingly, our own Health and Safety Executive was seen to be publicly encouraging the culture of blame. The whole episode was an appalling waste of public money and the then chairman of the Health and Safety Executive should have resigned.
§ It should be possible to check the excessive zeal and lack of common sense of some of our regulatory authorities. As the Romans used to say, "Who will 283 judge the judges?" Would it be possible to extend the powers and resources given to the Audit Commission so that it had time to audit regulatory effectiveness and to hold such bodies to account?
§ The Better Regulation Task Force does valiant work, but it is like matching David against Goliath. It certainly needs more clout and a wider remit in all departments, particularly over pre-legislative scrutiny and RIAs. Its power would be substantially reinforced if there was a Standing Committee on deregulation, probably composed of Members of both Houses. I would welcome the Minister's views on this. I am not suggesting that the Government are not conscious of the problem. At least employment regulations are now co-ordinated to appear on two days a year. This should be made to apply everywhere, but more importantly, the Government should attempt to stem the flood of regulation in the first place.
§ We live in an increasingly safety-conscious age, a litigious age. Sadly, many lawyers who used to run their practices with an ethos of what is good for society—pro bono publico—now do so wholly to exploit the system under the maxim, "Where there's blame, there's a claim". An increasing number of lawyers, like leeches, bleed the rest of us white. I often wonder, too, whether some of our judiciary understand that it is not just an insurance company who pays, but ultimately their fellow citizens. Many people feel that somehow society must reverse this ethos of blame.
§ The examples of over-regulation, litigation and its consequences are unlimited. We all know how the well intentioned regulation on canoe sporting clubs, as a consequence of the Lyme Regis tragedy, has closed down most of the amateur canoe clubs in this country that gave such wonderful outings and fun to so many school kids. Only this week in my local town the cub scout group is closing. It had been run for 20 years by the most delightful vicar and his wife, who now say that they simply cannot afford the cost of registering with the Criminal Records Bureau and the 21 sessions of retraining to be able to carry on. Sadly, they can find no one else who wishes to take on the responsibility, compliance costs and hassle.
Likewise, only this week the second biggest teaching union, the NASUWT, advised its 200,000 members not to take children on school trips:
It is highly regrettable NASUWT has been forced to advise members against taking school trips. When something goes wrong, the leader bears legal responsibility—an accident is no longer treated as an accident. It leads to lengthy enquiries by the police, the local education authority and the Health and Safety Executive".
This is a classic case of the unintended and malign consequences of over-regulation.
§ I shall not attempt to blame obesity solely on safety precautions, but if one makes school playing fields and sports activities subject to too much safety regulation, those who might have been team leaders and instructors and who would have happily given their time free, now walk away from an over-litigious task. Over-regulated sport equals no sport. In an effort to 284 prevent minor tragedies, we undermine major benefits. We must make it perfectly normal for laws to be readjusted in the light of circumstances, or to be abolished where necessary. If we could make the implementation of sunset clauses a wholly natural process, it would begin to chip away at the tide of overdone safety and other regulations that are unnecessarily damaging our society.
§ However, the problem is wider than that. It is damaging the whole concept of personal self-reliance. If we are encouraged to believe that it is never our fault and always somebody else's, that we are not responsible for our own actions, that it is the fault of the society in which we live and not we ourselves, that it is the seller's fault and not ours, we undermine the whole basis of our historic laws. If we substitute caveat vendor—let the seller beware—for caveat emptor—let the buyer beware—we reverse the whole concept of blame by denying responsibility for our own actions.
§ If all matters are defined in detail in legislation, people will spend their time and effort working out whether what they are proposing to do falls within, or can be made to fall within, the law. Surely, we want a society where people should be asking themselves whether what they are proposing to do is something which in principle they ought to do or ought not to do. Apart from the economic consequences of excessive regulation, the greatest unintended consequence is that the denial of personal responsibility becomes embedded in our culture. The road to national decline is paved with well intentioned regulations. I hope that this debate will help to reverse that trend. I beg to move for Papers.
§ 6.16 p.m.
§ Lord MacLaurin of Knebworth
My Lords, I am grateful to my noble friend Lord Vinson for introducing this debate. I speak as chairman of the Vodafone group. It would be hard to think of a better example of innovation and enterprise in the United Kingdom over the past two decades than the mobile phone industry.
There are now 51.5 million mobile subscribers in the United Kingdom enjoying a wide array of mobile services that nobody could have imagined five years ago—that is 87 per cent of the people in this country. There may not be many Members of your Lordships' House experiencing the joys of customised ring tones, but millions of people do. The industry stands on the verge of another technological revolution as the next generation of services—the third generation—is rolled out.
The UK mobile companies are world leaders in the industry, and most of this was achieved without specific regulation. The Government initially had to award radio spectrum to the operators, but then largely left them to get on with it. They did that most successfully on any measure, from the number of customers to the value created for the British economy. Of course, the market economy must be built on the foundations of a solid legal and regulatory framework. I want to focus on the trend towards 285 regulations that are specific to a particular sector or industry, as opposed to the basic rules governing the function of the economy.
We need to be much clearer about what circumstances justify this kind of specific regulatory intervention and how the impact of those interventions is assessed. We are now seeing more regulatory attention focused on mobiles. Perhaps it is the very success of the mobile industry that has attracted this attention. I will talk about some of our specific experiences and make a few observations arising from them about the real motives for regulation.
The industry faced one of its biggest challenges when the Government decided to auction the last hatch of radio spectrum, which resulted—to the surprise of many, including I suspect the Chancellor himself—in the industry paying over £20 billion to the Exchequer. It is hard to see how this intervention assisted the industry or its customers. It has taken several years to recover from the financial consequences. The Government's stated intention in designing the auction was to ensure that spectrum was allocated more efficiently than in the past, but it is reasonable to ask whether it was not simply a slightly more sophisticated form of windfall tax on past profits.
While people in the industry could be expected to have a better idea than civil servants about how profitable their business would be over the long term, no one could escape the innate uncertainty about a new technology or indeed about the future of the economy. The auction moved all these general risks on to the mobile phone operators.
Additional regulation has often been called for by competitors of the mobile operators rather than by their customers. Although regulators invariably claim to act on behalf of and in the interests of consumers, complaints from customers are often not the driving force. What is more, the immediate effect of additional regulation is often to protect particular competitors in the market. In particular, it favours those who may be better armed with advocates and lobbyists than with commercial acumen. As the Director-General of Fair Trading noted in a recent lecture, a competitive market will often protect consumers more effectively than additional regulation. That is especially true in an industry such as mobile. When the technology and consumer demands shift rapidly, it is all but impossible for regulators to keep up with the pace of change.
Arguments in favour of further regulation typically focus on potential benefits that are short-term and narrowly defined. It might be easier to quantify them in that way, but it leaves out of the reckoning the accumulated long-term costs, perhaps spread widely over all consumers. They will often be large—87 per cent of people in this country are mobile users—but they may be difficult to quantify. Without taking them into account, there cannot be a proper cost-benefit analysis of any regulatory proposal. The need has been recognised recently by the Dutch, Irish, Luxembourg and UK Governments for better impact assessments of regulatory proposals at the European level. We must apply the same lesson at home.
286 If we are not careful, we will eventually drown enterprise and innovation in a sea of piecemeal regulation. We need to continue to work hard to ensure that regulators take the long-term view and take account of the interests of all consumers. From that perspective, detailed intervention in a particular sector will not look like the obvious answer to every problem.
What should regulation accomplish? We should be very clear. It is right to be concerned about fairness and affordability, but such issues are properly addressed by elected representatives, rather than by unelected regulators. Otherwise, there is a real danger that regulators could become unduly politicised. We rightly have a system of transfers and reliefs that are intended to ensure that the most disadvantaged members of our society have access to the basic requirements of participation in a civilised society. For the most part, we do that without a detailed set of regulations for every individual industry. So I hope that Ofcom and the other industry regulators take a more pragmatic approach to regulation.
The test for the specialist regulators should be: "What would he the result, if I were to apply the measures that I am proposing for my narrow area to the rest of the United Kingdom economy?". After all, most parts of the economy do not merit a specialised regulator. Most industries safely fall under the ambit of the Office of Fair Trading and the Competition Commission. Regulators who focus on one narrow area need to remember that competition is never perfect in any industry, but that it is often better than the alternative of detailed regulatory scrutiny. Of course, the authorities need to take action against monopolies. Indeed, the UK pioneered incentive regulation of the former state monopolies. The Enterprise Act 2002 has made the competition regime in the United Kingdom one of the most stringent in the world. That will boost enterprise and innovation, but we threaten our economy if we do not check the creep of regulation to markets that are, in fact, formidably successful and competitive.
The growth in regulation has been considerable. The combined operating costs of Ofwat, Ofgem and Oftel were £42.6 million in 1996–97. Those costs were up by a further 65 per cent by 2002–03. We must scrutinise regulatory budgets, but I have some sympathy with the views of the noble Lord, Lord Currie of Marylebone, the chairman of Ofcom, when he says that good regulation does not come cheap. That is an important point: the focus should be on the quality of regulation, not just the cost.
The judiciary should have an increasingly important role to play. For too long in this country, regulators have been subject to review only on procedural aspects of the case under judicial review procedures. The regulators are invariably well advised. The new Communications Act, considered in this House last year, at least introduces appeal rights on the merits and substance of the matter at issue. These will be complex and difficult cases, requiring expertise in finance and economics as well as the law. It is important that the 287 courts or the Competition Commission, as the case may be, engage fully in such matters and are fully aware of the broader consequences.
Some regulation is absolutely essential to a properly functioning market economy, but we must be wary of the assumption that regulators can be relied upon to improve on the market in terms of social and economic outcomes. We need to check the creep of intervention in specific sectors and ensure that the potential costs of regulation are weighed against the benefits. Enterprise has served this country very well. We must continue to provide it with the freedom that will allow it to thrive.
§ Baroness Farrington of Ribbleton
My Lords, I wonder whether I could draw to noble Lords' attention the fact that the timing for this debate is extremely tight. There is absolutely no time to spare for people to speak beyond their time.
§ 6.26 p.m.
§ Lord Haskel
My Lords, I congratulate the noble Lord, Lord Vinson, on moving the Motion and thank him for doing so. However, I must say to the noble Lord that the purpose of regulation is not only to achieve a level playing field but to reflect the values and aspirations of our society. I do not agree that regulation overwhelms our society and undermines our economy. If that were true, the least-regulated countries would be the most successful, and people would move to the least-regulated countries, such as Nigeria. The fact is that the G8 economies are the most successful and they are the most highly regulated, but most people want to live in those countries. Perhaps, the first unintended consequence of regulation is that it is good not only for our society and quality of life but for the economy.
I shall give your Lordships an example. A study arising from the European Union's water resources framework directive by the Department of the Environment concluded that the amenity benefits could total £1.9 billion in England and Wales alone from the improved water. In addition, there could be benefits to anglers of £706 million. The unintended consequence of higher environmental standards is that they provide incentives for companies to be more efficient and to cut waste. Indeed, a recent report by Imperial College and the Fabian Society concluded that the actual cost of compliance was therefore much lower than the cost of simply abating the pollution. If the benefits are taken into account, the cost could even prove to be negative. The market in carbon emissions is having exactly that effect. Without being prescriptive, it encourages companies to change their processes to become more efficient and, therefore, less polluting. That saves time and money and protects the environment. Is that an unexpected consequence of regulation?
That leads me to another consequence of regulation. Because high standards make a country a more attractive place in which to live, the means of achieving those high standards has given rise to whole new industries, creating a new and growing sector of the economy. I declare an interest, as honorary president 288 of the Environmental Industries Commission, which is a group of 250 UK companies that deliver higher environmental standards through engineering, technology and innovation.
That does not mean that more regulation is good: it means that regulation must be right, as the noble Lord, Lord Vinson, said. It must be balanced. It must reflect the aspirations of our community. It must have reasonable lead times. Many of our regulations come from Europe. We heard from the noble Lord, Lord Vinson, about the red tape and bureaucracy involved. There is some justification in that. The justification arises in part because we have a culture in this country of ensuring that the law is obeyed. It is an honourable and sensible culture to which we are all committed. It is because of that attitude that we insist on implementing regulations to the letter. As the noble Lord, Lord Vinson, said, as regards European regulations we call it gold plating. My right honourable friend the Chancellor of the Exchequer is aware of this. In trying to identify and minimise unnecessary excess he has asked companies to write to him stating which European regulations they find offensive and unreasonable.
The Government have also asked Sir Peter Gershon to report on how the administration of regulation can be eased and the costs reduced. I congratulate them on that. According to the Financial Times report last week there are some sensible proposals on the horizon. Sir Peter recognises that it is particularly irritating for companies to send similar data and information to several government departments when they could obviously share the information. It is equally irritating to be inspected by two or more regulatory organisations when obviously one visit could take in two or more regulators. He is considering, therefore, how forms, visits and data should be co-ordinated so that each serves a number of purposes.
However, more can be done. Obviously firms and organisations which comply and work to high standards need less regulation than "cowboys" but the law does not allow for that flexibility. We now have a much greater awareness of corporate responsibility. Regulators should recognise that and perhaps take a risk with companies and organisations which show a high degree of responsibility. They should listen to organisations which say, "This is what we believe in; this is our culture; there is no need to regulate us, we shall do it anyway".
It is to be hoped that Sir Peter Gershon will tell us how regulation can be more streamlined and made more effective. It is to be hoped that the outcome, unexpected or not, will be not only a decrease in the cost of compliance but also an increase in the efficiency of our regulation, leaving more money for front line public services.
In the meantime we cannot afford to ignore regulations from Brussels. I give one further unexpected result. Because of the political sensitivity of some of the regulations we often tend to be late in implementing them. It is an understandable attitude. But those countries which move to implement regulations early also encourage the development of the technologies needed to meet those higher standards. They then sell 289 those technologies to other countries as they catch up. For instance, when we finally decided to implement the regulation regarding the disposal of fridges and the dangerous gas in them we had to buy the technology to do so from Germany. However, we were quick to accept the regulations regarding aircraft noise and Rolls Royce developed the Trent 600/900 engine to more than satisfy the regulations. As a result, about one-third of the world's passenger aircraft now fly using those engines. Is that an unintended result of regulation?
A Private Member's Bill was introduced in another place on 4 February which allows business, individuals and public bodies in Britain to seek a declaration by the courts that regulations from Europe are ineffective here if their provisions go beyond the basic minimum required by Community law. The unintended consequence will be that our quality of life will scrape along the bottom; it will be minimalist. Our economy will suffer as we accept lower standards; and Britain will gradually become a less attractive place in which to live and work. I hope that noble Lords will join me in opposing the Bill when it comes before us.
§ 6.34 p.m.
§ Lord Freeman
My Lords, as usual the noble Lord, Lord Haskel, makes his points in a very reasonable manner. The time for good intentions has long since passed. That is why I congratulate my noble friends Lord Vinson and Lord MacLaurin on making the point that tough measures must now be taken. My noble friend Lord Vinson is right in drawing the Government's attention to the wisdom of having a Standing Committee. I do not think that Parliament does a good job in reviewing, or even in being able to change, regulations. The sooner we can reform the practices not only of this House but also of another place the sooner we shall make progress.
I wish to draw noble Lords' attention to some statements made over the past five years by public servants who are to be congratulated on their battle against the flood of regulation under this Government. They are beginning to realise—there are some indications that the Prime Minister and the Chancellor realise it—that steps must be taken not only to reduce the current burden but to stem the flow. Rather than asking the Minister to respond at the end of the debate—I have learned to do this from hard experience in this House—I shall go straight to the Table Office to put down five questions. Rather than trespassing now on the Minister's time, I may receive in due course a more considered and comprehensive answer.
First, I refer to the Better Regulation Task Force. I pay tribute to the chairman, David Arculus, Theresa Graham and their colleagues in what they seek to do. Theresa has been a member of that task force under both administrations and I pay tribute in particular to her. My first question is this. When will the task force report on the results of its investigation, which is welcome, into whether the European Commission is doing enough to stem the tide of unnecessary business regulation? I think that we all know the answer in principle but some detailed comments from the task force when it reports will he much appreciated.
290 I draw your Lordships' attention to the report of the Better Regulation Task Force published in October 2003, headed Independent Regulators. It states:We question whether even Ministers could be certain that they know of all the independent regulators that surround their Departments. The regulated also expressed concern. This is obviously a situation that cannot be allowed to continue".Neither the Better Regulation Task Force nor Ministers can tell us definitively how many regulators there are. The task force makes 14 recommendations. My second question will be this. What progress has been made in dealing with those 14 recommendations?
The Audit Commission's report, Strategic Regulation: minimising the burden, maximising the impact, is excellent. It says that the burden of interference with local authorities and other public bodies has got to an intolerable pitch and that more strategic regulation is required. The report states:The current system of regulation of public services is fragmented and there are legitimate concerns about the cost, value and accountability of regulation. This presents a significant challenge to regulators".Therefore, I shall ask the Minister what progress has been made in that regard.
In November 2003, the National Audit Office published a report entitled Success in the regions. Your Lordships' Select Committee on Science and Technology has published a report on the relationship between the regional development agencies and the science base, and the over-regulation and direction by central government departments of what the RDAs seek to do. On 19 November, in summarising the National Audit Office report, the Financial Times, said:Over-interference from Whitehall is undermining efforts to stimulate regional economies by forcing agencies to waste time and money responding to civil servants' demands".My question to the Minister is: have the DTI and, in particular, the Treasury, paid attention?
My penultimate piece of evidence, to which the noble Lord, Lord Haskel, referred—I think his references were correct—is the work by Sir Peter Gershon. We have not seen his report. Perhaps the Minister may tell us when noble Lords will have sight of his report. On 17 February, Sir Peter is quoted in the Financial Times as concluding that,regulation and oversight is overdone to the point where it is counter-productive and threatens the government's most cherished goal—improved public services".How right Sir Peter is.
In conclusion, today I read in the Financial Times a report of what the Prime Minister said yesterday. My heart rose, not sank. I only hope that the Prime Minister means what he said. On government efficiency, the Prime Minister is reported as announcing,a review of regulation in both the public and private sectors saying 'we have to change the whole approach to risk'".My noble friend Lord Vinson put his finger on that problem. We are averse to risk in the public sector. I am sure that both Ministers and civil servants should ask themselves: "Do we really need to regulate in particular instances? Can we not trust the people? Can we not allow individuals to make sensible and 291 responsible decisions for themselves?". If we pursue that policy, we are on the right road to deregulating this society.
§ 6.42 p.m.
§ Lord Hodgson of Astley Abbotts
My Lords, it is a great pleasure to follow my noble friend Lord Freeman who had such experience of this topic when in government. I congratulate my noble friend Lord Vinson on the exhilarating way in which he introduced the debate today. I share his view that most regulations are designed to solve a problem, to remedy a deficiency. They answer a genuine need and therefore deserve serious consideration.
There are two major exceptions to that rule. The first is what I call the knee-jerk reaction to one-off events. The "something must be done" reaction following short-term public pressure. I am afraid that I do not exclude my own party from any blame in this regard when it was in government. For example, the Dunblane tragedy was appalling. But I am very doubtful about what the regulations that followed Dunblane did to inhibit gun crime generally. Currently, no doubt, the Government are under pressure with regard to the cockle-pickers in Morecambe Bay. It is another terrible personal tragedy, but no doubt it will lead to the Government coming under pressure to produce some special regulations to cover that one-off event. So, first, we have knee-jerk reactions.
Picking up the point made by my noble friend Lord Freeman, the second exception is the command and control wish to centralise more power to enable Whitehall or the authorities to interfere, pry and control. I am afraid that this Government are very susceptible to command control ideas.
So much for how we add to regulations: what about subtracting from them? That is a much less easy task and we are much less good at it. There appears to be no overview or cross-departmental view of regulatory burdens: there is duplication, overlap, inconsistency and, sometimes, outright opposition between regulations from different departments. There is no consideration of the overall effect; the straws on the camel's back. Individual regulations of themselves may be beneficial, but taken as a whole they are extremely detrimental. As Archie Norman MP raised in another place, there is no subsequent reassessment.
Some regulations ab initio prove ineffective or even useless. But, overall, regulations, like most things in this world, have a shelf life. Their value wanes as society changes, but they are left in existence. Officials warn Ministers against removal because of the political danger of unexpected events. I regard them as barnacles on the ship of state. A single barnacle would be no problem, but we have hundreds of barnacles now and they are causing extreme and increasing damage.
Perhaps I may give a couple of short illustrations. I accept that they are trivial examples, but the burden of regulation is about the cumulative effect of triviality. It is not about a great clash of ideas. It is just the steady 292 encroachment of octopus tentacles. My first example is from the Environment Agency. For many years my family has rented a short stretch of trout stream at Malmesbury, North Wiltshire, into which every year we put about 120 brown trout. Under Section 30 of the Salmon and Freshwater Fisheries Act 1975, we have to apply for an application to introduce those fish, which is absolutely fair and perfectly reasonable. New stock being introduced must be wholesome.
Each year, I used to telephone Mr Steve Thomas, a delightful man at Bridgwater, to ask for a form that I could fill in and return to him. Two years ago, he told me that he was no longer able to send me a form because new regulations required a central register to be maintained, which was run from Peterborough. So I called Peterborough. I pressed buttons one and two and listened to some Mozart. I pressed button three and listened to some more Mozart. Finally, I reached a lady who told me that the forms could not be sent in response to a telephone call. I had to write in for a form. Why? That is because the register required a formal application.
I sent in a letter requesting a form; the form came back to me. I sent the completed form off. The lady wrote back saying that she had received my form and was pleased to tell me that,It has been passed to Steve Thomas … for determination".That is five or six letters where two used to suffice.
Letters probably cost about £10 to £15 each. My trout application is now costing me and/or the state £45 to £60 more than it did two years ago. Will this break my bank or the Environment Agency's bank? Of course it will not. But that is one of hundreds of thousands of examples around the country that are driving people crazy because of the waste of effort and the huge economic drag on our prosperity.
The second example is about money laundering and NCIS. I am the director of a building society and I am chairman of its audit committee. It is a blue-collar society in the West Midlands. We have to follow strict guidelines on money laundering and we have a money laundering officer. Of course, we are content to do that because we want to help the fight against crime, although since most of our returns are for sums below £200, I am not sure that much money is being laundered.
In the 12 months to 30 September 2003, we sent 173 referrals to NCIS. What response have we had? The answer is, absolutely none. We are a small society. NCIS must be getting hundreds of thousands of reports. Does anything ever happen to them'? At the last meeting of the committee, I asked whether NCIS could be approached to tell us how we were doing. As recorded in the minutes of the meeting, NCIS was prepared to say only that,A conversation with NCIS officers suggests that if there were an issue with report quantity or quality the Society would have been advised".So we have absolutely no confidence that those reports are being used in any meaningful way. It is just form filling and box ticking.
In my last minute, I should like to offer some suggestions about how we might improve matters. I share the view with other noble Lords that we will not 293 be able to unpick regulation. First, we need to stop gold-plating; that is, adding regulations on top of what is required from Brussels. As my noble friend Lord Vinson said, we definitely need to insert sunset clauses in all regulations. We need to find ways of providing opt-outs for very small businesses and so encourage entrepreneurial activities. As many noble Lords have said, we need to initiate a sensible discussion about risks and the limitations of personal responsibility.
My noble friend Lord Vinson referred to air safety. I should like to refer to rail safety. Over the past 10 years, passenger miles have increased by more than 25 per cent, and I understand that more people are travelling by rail than at any time since 1950. During the past 10 years, according to a Written Answer from the noble Lord, Lord Davies of Oldham, in no single year have passenger fatalities on the railways exceeded 20, oilier than in 1999–2000 when there were 40. That should be compared with the hundreds of deaths every year on our roads. Are we actually having a sensible debate about risk and the relative risk of different forms of travel?
Whatever is the case, we urgently need to consider radical steps if we are not to dent our economic prosperity by strangling ourselves in red tape.
§ 6.50 p.m.
§ Viscount Goschen
My Lords, I was particularly struck during the course of this debate by the importance of your Lordships' House as a pre-emptive filter for unintended consequences. My mind went back to legislation with which the Minister and I were involved—the Regulation of Investigatory Powers Act. It came from the House of Commons with a glowing report from that Chamber, but had it been enacted as it arrived here, the consequences for the e-commerce industry in this country would have been absolutely devastating. Those consequences were only picked up here.
I was also struck by our difficulties in amending secondary legislation; that is, individual regulations faced with a nuclear option of forcing a confrontation and throwing a regulation out, as opposed to making some minor change.
We are not really talking here about regulating new forms of human endeavour. My noble friend Lord MacLaurin talked about the mobile phone industry. Clearly that had not been envisaged before and required some regulation, but generally we are talking about regulating areas such as agriculture, building and trading, which have been around for centuries. So all that we are doing is increasing the volume of regulation and putting less importance on prioritisation. If the statute book continues to grow at the rate that it is, the public will begin to lose confidence in the regulations. Regulations can work and be supported only if those who are being regulated—and those who have to impose regulations—believe to some extent, even grudgingly, that the rules are worthwhile.
I was interested to hear my noble friend Lord Vinson refer to travel safety; indeed my noble friend Lord Hodgson talked about rail travel. In our 294 debates we are in real danger of focusing on rail fatalities and chasing people on to the roads—which in terms of death are more dangerous by a factor of at least 100.
I am concerned about the ratchet effect here. We have the Deregulation and Contracting Out Act—the Government have the power at their disposal to get rid of unwanted regulation. I offer the Minister the opportunity to inform the House how that is going. How much regulation has been amended by this route? What does that represent as a percentage of the statute book? What is the net position regarding new regulations that are introduced versus existing regulations that are removed? I suspect there might he some imbalance.
Transport safety is not all bad. In one very good example, the Civil Aviation Authority has delegated certain powers to a small group known as the Popular Flying Association for the regulation of small vintage home-built aircraft. That works very well. It is staffed by enthusiasts and is a good example of how you do not need more legislation in order to keep high standards of safety.
There is a gap between the rhetoric about deregulation from this Government and the reality. We have recently read stories of "Brown battles against EU red tape", but I am not sure that the better regulation that we have heard is the objective of the Government is necessarily the whole case. We need less and better regulation. I would put considerable emphasis on the volume of legislation and support proposals for more sunset clauses.
There is also an opportunity for the Minister to give some figures. We have heard the figure quoted that the British Chambers of Commerce estimate the cost of new business regulation since 1998 as over £20 billion. The Government dispute that figure; let us hear what the Government believe the actual figure is. They must know, because presumably they have undertaken regulatory impact assessments. The £20 billion does not even include the £10 billion of the national minimum wage, which I understand is the Government's own figure.
We know a lot of this pressure for regulation comes from Europe and I will leave that issue to others, but I believe that there is a feeling deep within the heart of this Government that legislation on its own can cure problems of society. If there are too many low-paid workers, we should legislate to increase their pay and we will all be happy. If there are concerns about imbalance in society, we should impose social engineering regulations on university undergraduate selection. We heard at Question Time today that if there is disparity between shopfloor pay and the boardroom, that can be solved with legislation as well. But of course it cannot: there are no net gains to be made just by regulating to make people richer or better off, or to enable them to work less.
We need to look in more detail at these regulatory impact assessment procedures, and to question whether this process is taken seriously by the Government. What role does the Department of Trade and Industry have in 295 defending the interests of business? People are often concerned about the DTI and wonder what it is for. It does perform a number of valuable functions, but surely one of these functions is to act as an advocate for business when regulations are brought forward. Can the Minister give us good recent examples of the DTI reining in regulatory departments? Are the Government adhering to their own rules?
The British Chambers of Commerce study of the national minimum wage RIA found that no alternative options were being reported; the question of who picks up the cost of enforced wage rises was not discussed; there was no overall summary of costs and benefits. Despite that, the sponsoring Minister at the time, Mr Stephen Byers, signed that he was satisfied that the balance between cost and benefit is the right one in the circumstances. That is a weak assertion and apparently made on the basis of very limited information. The Government must show that they are not just going through the motions.
I would like to know how many regulations have failed to proceed because of an unacceptable RIA. The BCC study found only 11 cases over four years where that has happened. Is that the case? It is important information.
How do the Government monitor the efficacy of the RIA procedure? It is important to note that in this BCC study, 68 per cent of its respondents believed that consultation operates poorly and the majority of respondents stated that the consultation process had little impact on the final regulation.
My noble friend Lord Vinson talked about the importance of personal responsibility and I echo that. I recall the arrangements made to introduce contingency fee arrangements. The original purpose—while outwardly to broaden access to justice—might have had something to do with trimming the legal aid bill. But the result is that we get ambulance-chasing spurious claims and spiralling insurance costs in a litigious society, such as that which destroyed whole industries—including the light aircraft industry in the United States—until it was corrected.
I urge the Government to think twice before calling on a parliamentary draftsman.
§ 7 p.m.
§ Lord Harris of High Cross
My Lords, from the Cross Benches I should like to congratulate my old friend the noble Lord, Lord Vinson, on the Tory side on his splendid opening speech. I also congratulate the noble Lord, Lord Haskel, as the only occupant and spokesman on the Labour Benches.
The phenomenon of regulation is nothing new. The 19th century saw the introduction of extensive regulation in factories, banking, weights and measures, sale of goods, the adulteration of food, private contracts and much more. What is new is the scale of unchecked and indiscriminate regulation to restrict competition. It is yet another example of my favourite word these days, which is "inordinacy". That term suggests the temptation to take everything to excess.
296 An example that today would be widely accepted but which was much contested a few years ago is that of the Shops Acts. Here was a complex rigmarole of regulations on hours and days, opening and closing times and so forth. The intentions were benevolent in that they sought to prevent the exploitation of shop workers, but the consequences were wholly baneful. They froze competition and delayed the revolution in retailing which has extended choice not only to shoppers but, no less, to shop workers themselves.
A regulatory framework is necessary, but it must not swamp competition. Regulation is inevitably restrictive and unproductive. In contrast, competition is progressive, enterprising and dynamic. It is said that the trouble with competition is that it is not perfect according to textbook theory. However, it is one thing to provide guidelines, but quite another matter to bury competition beneath extensive uniform standards. I searched for a homely analogy and found that of the motorist. He will accept the Highway Code, speed limits, even congestion charges and perhaps the occasional speed camera, but he will not accept the Minister getting into the driving seat.
Why has regulation mania grown like Topsy over recent years, especially in the labour market? According to a recent Hobart Paper on employment tribunals by Professor Shackleton, the direct administrative costs total around £1 billion per year. However, the total cost of our compensation culture dwarfs that sum. Various estimates range from £5 billion according to the British Chambers of Commerce, £6 billion according to the Institute of Directors and an impressive £10 billion according to the Institute of Actuaries, including a steep rise in premiums for employers liability insurance. My first question to the Minister is this: what is his best estimate of the cost of regulations in the labour market?
My second question is this: who pays the cost? Economic analysis shows that firms faced with a new levy or tax seek to shift the cost forward to customers in higher prices or backward to workers in reduced employment. If competition makes it impossible to escape the cost, it falls on profits, which means that investors will put up less capital for future expansion. Which of those damaging effects does the Minister prefer? Does he prefer higher prices to cover the cost, does he prefer lower employment, or does he prefer contracting businesses? Or does he prefer to dwell in Tommy Cooper's make-believe world where costs simply vanish—just like that?
There are several reasons why this costly mountain of regulation has grown. One is that regulations are cheap for governments because they do not have to meet the costs of compliance. Another reason is that while the apparent benefits of regulation are concentrated and highly visible, the costs are widely dispersed, delayed and obscure. Thus in the short run, trade unions stand to gain from regulation favourable to their members. It pays them to invest heavily in organising and lobbying for government favours without concern for the long-run damage, even to their own members. Since governments do not pay the bill, 297 weak Ministers have no incentive to resist the constant pressure for more regulation. In any case, Ministers crave popularity.
The wider, deeper and longer-term unintended consequence is that costly job protection may end up costing jobs. If a restricted, rigid labour market prevents firms responding flexibly to the constant challenges of change in a global economy, British firms will lose out further to foreign competition. Thanks to radical liberalisation by the Tories after 1979, we forged ahead of France and Germany. Today their highly regulated economies have condemned them to massive unemployment and stagnation. Yet our head-in-the-clouds Prime Minister boasts of a campaign to liberalise restrictive economies in Europe while his colleagues yield to every pressure to restrict and rigidify the labour market at home.
The reckless increase in British regulation is encouraged, even incited, by the various commissions on equal pay, minimum wages, conditions at work and various forms of discrimination—real or imagined—relating to race, sex or age. Applications to tribunals more than doubled from 38,000 in 1985 to 80,000 in 1997, and rose again to 130,000 by 2002. This explosion of grievances is encouraged by absurdly inflated and well-publicised jackpot awards to lucky winners.
The full costs and consequences of regulation extend far beyond higher prices, lower employment and reduced investment. Most hidden of all costs are the daily frustration, hassle and distraction of complying with ever-increasing regulations and their frequent changes. Do Ministers simply not care that this inordinate legislative activism has already driven many small, defenceless businesses to the wall? Our complacent Chancellor may shrug off such warnings with the constant refrain, "Behold! The economy is doing fine". I believe that he once studied economics, so I shall remind him of an old Liberal adage: what gives regulation the illusion of working are the freedoms that regulation has not yet destroyed. A strong economy can bear much mischief, but this progressive process renders effort and enterprise ever weaker and less able to bear the increasing burdens.
§ 7.7 p.m.
§ Lord Plumb
My Lords, if I had a little more time in which to speak I would add to the stories told by my noble friend Lord Hodgson, but I welcome the opportunity to support my noble friend Lord Vinson in drawing attention to the unintended consequences of regulation. I could speak at considerable length in exploration of the myths alleged to have come from Brussels—from bananas to double-decker buses—but I take seriously the question of the effect regulation has had on competition through misinterpretation and misrepresentation. Reports on regulatory issues and on the cost of inappropriate regulation are enormous.
It will not surprise noble Lords to learn that I take a more earthy approach to this problem and to the effects of regulation on the land, farming and farmers, as well as on the wider countryside.
298 There are several motivations for inputs into agriculture, such as dangers to the health of farmers and farm workers, the effect some products may have on consumers and hazards to the environment. Restrictions are put on the use of some chemicals and seed imports are banned from countries with seed-borne diseases.
Regulatory systems may also monitor the quality of inputs that are sold to ensure that they are unadulterated and correctly labelled. But I have to say that, as we look around the world, the mind boggles when we consider the problems facing the World Trade Organisation when formulating regulatory reform in developing countries, taking into account both over and under-regulation.
Many of the current systems have difficulty in adjusting to the rapid technical change in agriculture and to the growth of private input trade. Therefore, I shall take three examples of what I consider to be poor, good and inappropriate regulation, three examples of what I consider are the worst aspects of regulations in agriculture, of which I could name many.
First, the nitrates directive is a classic case under which huge amounts of money have been spent in implementing the standard, which is widely regarded as scientifically flawed. The Government have been forced by the threat of infraction proceedings by the European Community into an implementation approach that could have been achieved in a much more sensitive way. A light touch could have been taken with fewer adverse implications for the management of and the costs to farm businesses involved.
Secondly, there is the animal by-product directive under which it has been unlawful to bury fallen stock since last May. That is another example of very poor handling—indeed a fiasco—resulting in a last minute rush of domestic regulation, which was much delayed, with the risk that the United Kingdom would be in trouble with Brussels again for failing to implement the directive effectively.
Thirdly, the Government have accepted that fly-tipping is a scourge on the environment. Some time ago the regulations proposed included the idea of charging occupiers of land to clear up waste that is tipped on their land—I speak from personal experience—only because they are sitting-duck targets, as it is more difficult to catch the perpetrators. Regulations should be directed at the guilty, however difficult they are to enforce, but not at the innocent party who can be easily imposed upon. Fortunately common sense seems to have prevailed as Alun Michael in another place said yesterday that although the Government want more robust powers under the Environmental Protection Act for clearing waste from land, it is not, after all, planned to remove the defence for landowners and occupiers who have not knowingly caused or permitted fly-tipping to take place.
I have one example of a good regulation—I give only one because I could only think of one. Like other small businesses in general, farmers are hardly looking for new regulations. But there arc circumstances where appropriate regulation has its place. I support the Sheridan Bill, which I understand will be debated in 299 another place on Friday and which will introduce a statutory scheme for regulating gangmasters. That is an appropriate theme to consider at the moment. Farmers and growers need a flexible source of skilled labour but it is recognised that some gangmasters abuse and exploit their workers. The law needs to be cleaned up and nothing short of changing the law to bring the situation under better control will be adequate for the task.
On inappropriate regulation, my noble friend Lord Vinson's debate focuses on the unintended consequences of regulation. There is an instinctive tendency among legislators to reach for new laws to tackle issues that they believe need to be controlled or regulated. Usually such new laws are concerned with stopping citizens from doing things that otherwise would be unlawful. Obviously, society requires such measures in relation to criminal activity, like theft and assault of a person, but they are much less persuasive in regulating businesses.
The RSPB among others has campaigned for a tax on pesticides because it believes that farmers use too much of them and that there is a direct link with the decline in the populations of farmland birds. Imposing taxes on pesticides would be bound to have unpredictable results. It would be no more likely to result in benefits to the environment than would slapping tax on hamburgers and other fatty food lead directly to a decline in the nation's level of obesity. I can speak! A much better approach is to involve farmers in partnerships, which will result in crop protection management plans that will deliver far more benefits for wildlife and the environment generally than the blunt instrument of tax.
§ 7.15 p.m.
§ The Earl of Onslow
My Lords, I was, perhaps rather unkindly, amused by the completely justifiable attack of my noble friend Lord Freeman on over-regulation. I wondered whether he was quite so keen on it when he was in Cabinet. Those in Cabinet are always tempted to regulate and those outside government are tempted to do a lot of kicking.
§ Lord Freeman
My Lords, my noble friend may have forgotten that in Cabinet I served as the Minister responsible for deregulation.
§ The Earl of Onslow
My Lords, that means almost certainly that it did not work. That was a friendly, gentlemanly tease. The problem of regulation is nothing new. John Masters' book, Bugles and a Tiger, is about how an officer had to travel across half of India to arrest someone who had stolen the mess funds. He had to fill in a form and finally, in exasperation, the clerk at Indian army headquarters asked why the officer did not take his horse as he was a field officer and why had he not applied for the money to bring it back. That was carrying regulation too far. Gulliver's Travels has also been quoted so the problem is nothing new.
300 The noble Lord, Lord Haskel, had the situation half right. I completely agree with him. He said that the rule of law and security of property are essential to both human and economic progress. That goes without saying. Society cannot have those things without the rule of law. Therefore, good regulation is a friend and an ally. Too much and bad regulation is the enemy. It is the "too much and bad regulation" that some of us find so irritating.
Of course, we do not wish to go back to the casualty rates that Brunel had when he built his first tunnel under the Thames. They were appalling. We must have health and safety regulations; we must have regulations to ensure that people do not drown casually because no one has carried out a proper survey. No one argues about that. But do the police have to dress up as road-menders because it might be unsafe for them to go out at night? They all wear yellow jackets. The excuse of health and safety comes tripping off the tongue and it is an excuse for doing nothing under certain circumstances.
I believe that when the Better Regulation Task Force was set up the number of regulations passed was something like 2,500 a year; it is now over 4,500 a year. I can give two or three examples. The asbestos regulations failed to differentiate properly between blue and brown asbestos on the one hand and white asbestos on the other. We have a totally fatuous regulation for horse passports solely because the French army had to eat them in the retreat from Moscow and acquired a taste for horse meat. The cattle and sheep movement orders have become more and more complicated.
My solicitor, to whom I have gone for the past 20 years, has asked me for my passport, a photograph of me and an electricity bill so that he can show the Financial Services Authority that he and I have not been money laundering for the past 20 years. Such regulation is fatuous.
I had reason to go into hospital the other day and on the consent form there was a section asking for my racial origins. The kind of thing that had to be ticked was whether I was Welsh black, English black or Friesian—sorry; those are cows. I could not be bothered to fill it in. I am waiting for someone to write to me asking why I did not fill it in to which I shall say that I could not be bothered. Such matters go on and on.
It is all very well for noble Lords to complain about over-regulation, but we have to expect that 80 per cent of English regulations now are passed in Europe and we have no choice but to accept them. At least with the 20 per cent that remain we can change them. Changing a European regulation is almost impossible. The acquis communautaire makes it almost impossible to change them.
The nitrate directive has been mentioned. Fly-tipping has been mentioned—but, of course, fly-tipping will increase if you put a land-fill tax on it. It follows as night follows day that if you make it more difficult and more expensive, the wide guys will go round the corner and dump it on my property or the property of my noble friend Lord Plumb.
301 I have a reference to health and safety in my notes. A pancake race had to he cancelled the other day because of worries about the public liability of children and women flipping pancakes. What kind of society are we becoming when we are so worried about women flipping pancakes?
I also note, with encouragement, that the Chancellor of the Exchequer and the Prime Minister go around Europe lecturing others on the need for less regulation and a freer labour market. I cannot remember the chapter and verse and in which gospel it is, but they should read the parable about motes and beams. If they are going to lecture others they should start by trying to cleanse the Augean stable of British regulation.
§ 7.21 p.m.
§ Lord Newby
My Lords, I, too, congratulate the noble Lord, Lord Vinson, on introducing the debate. While there is nothing new in the concept of regulation, as a number of noble Lords have said, we are undoubtedly more regulated than ever before. While there is nearly always a good case for regulation in principle, there is a growing sense that its volume and extent is increasingly disproportionate to the problems that regulations seek to tackle. As a result, they are often ineffective and counter-productive.
We all have our favourite nonsenses. Like the noble Earl, Lord Onslow, one of mine relates to money laundering. I have been working as the trustee of a charity for 25 years this year, using the same firm of solicitors to act for the charity. I now want the solicitors to conduct another piece of business b but, before they will even begin to accept me as a client. I will have to submit a passport and a utility bill. Among the many other nonsenses involved, they say apologetically that the regulations on money laundering contain no de minimis limit. So anyone can be covered by this. It is a clear nonsense.
Another area of nonsense is employment law, where far too many restrictive regulations are in place. One was referred to by the press at the weekend. A recruitment company was having great difficulty with the NHS because every nurse supplied to it by the recruitment company was newly required to provide 27 pieces of paperwork to prove that they had the relevant qualifications to do the job. Not surprisingly, not every nurse had the paperwork, although many of them were already working at the hospital. Before Christmas, the recruitment company bought a turkey for every nurse on its books in an attempt to get them to fill in the paperwork—but even that failed. Several hundred experienced nurses are now in jeopardy of having to leave their employment because they cannot find 27 pieces of paper relating to their entire employment history.
The area of health and safety has been mentioned. My particular nonsense in this regard concerns the issue of church picnics, a subject in which my wife is heavily engaged. Under the law, it is now impossible to ask people to bring to a picnic food that they have made themselves; it all has to be pre-packaged. As a 302 result, the whole character of a picnic has changed. You are opening supermarket packages of food rather than benefiting from the cooking and preparation of individual members of the picnic. That again is a nonsense.
The underlying theme in relation to health and safety and some employment legislation is that the concept of the accident is no longer acceptable. "There is no such thing as an accident", is increasingly the cry. More and more there is a blame culture when anything goes wrong, and there has been a huge growth in heavily advertised litigation. This has many unintended and unsatisfactory consequences, not least of which is that it deters volunteer leaders of community activity at a time when community activity is under threat from a whole raft of changes within society.
An area of regulation which, surprisingly, has not been mentioned concerns targets and inspections in the public sector and the vast plethora of additional tax legislation introduced within the past six years. It is hardly surprising that there is a sense that the regulation and inspection of the public services is so serious that the improvements to which the Government are rightly committed—and which we all hope will be successful—are in many cases being delayed and jeopardised because of the straitjacket in which those attempting to improve public services find themselves.
I agree very strongly with the comment of Sir Peter Gershon, reported last week, that an entire industry based on regulation desperately needs to he rationalised. I should love to be able to talk about the Gershon report today but, as has already been mentioned, the Government authorised its leak to one newspaper on 16 February with the sole purpose of upstaging the publication of the Conservative Party's public expenditure plans. A selected journalist was encouraged to publish extensive details of the proposals, yet Parliament and the country are still denied access to the report. In my view, such a cynical use of information and disregard for Parliament is typical of the Government and brings them and the parliamentary process into disrepute. I echo the call that has already been made that the Gershon report—in whatever form it was leaked to the Financial Times—should now be published in full.
How have we got into this mess on regulation and how can we get out of it? As the noble Lord, Lord Hodgson, said, we have event-driven regulation—the concept that something has to he done. In one sense, while there may be a case for the licensing of gangmasters, the gangmaster responsible for the death of the cockle pickers was breaking umpteen pieces of legislation already; the MP for Morecambe raised the issue. The problem was not that there was no regulation but that it was not being enforced.
A second problem is that when it comes into force it is a kind of belts and braces regulation which, if followed, would virtually eliminate the activity it seeks to regulate. This raises a whole raft of problems. The 303 noble Lord, Lord Vinson, tellingly made the point about the proportionality of the cost and benefit of regulation, which is often completely out of kilter.
Flowing from that is the impossibility of monitoring regulation. There is too much of it and the monitoring is ineffective. Returning to the issue of the cockle pickers, there simply were not enough people in that part of the country able to be deployed to look into what was going on. The more regulation we have and the more detailed it is, the more we lose track of the main issues and get bogged down in the detail. If we were to monitor the regulation properly, virtually every second person would need to be a regulator.
What happens when people break regulations? How are they treated? Enron, for example, largely followed the reporting and accountancy rules. It was all there in the annual report but it was very difficult to spot. Its officers did what they did because they thought they could get away with it. There is a real issue about ensuring that the punishment fits the crime in regulated areas. Otherwise, there is no adequate incentive for people to follow regulations in the first place.
Finally in terms of how we got into this position, there is the complicated additional layer of regulatory burden that has undoubtedly flowed from our membership of the EU.
I commend to noble Lords who have not read it the section on regulation in the government document published earlier this month, Advancing Long-Term Prosperity: Economic Reform in an Enlarged Europe. It points out that the IMF has concluded that improvement in the EU regulatory framework could deliver a 7 per cent increase in EU GDP in the longer term, and sets out what the Government are going to do about it, some of which is laudable. For example, I welcome the plan on regulatory reform that the finance Ministers of this country, Ireland, the Netherlands and Luxembourg have signed in order to boost regulatory reform during their four presidencies, and some of the specific things that they are committed to do. However, if the Chancellor is going to put this at the centre of his personal agenda, he needs to go to the meetings, which he consistently fails to do. It is no use making speeches in Westminster, but not turning up to ECOFIN and then expecting Europe, having been lectured by him, to do what he wants.
There must also be a change in the Government's mentality. Some of the Gershon arguments are strong, to the extent that I understand them and have seen them, and the Prime Minister apparently agrees. The Gershon argument for reducing compliance costs and increasing penalties sufficient to change corporate behaviour is a sensible idea. At the end of the day, determined people will always attempt to evade any regulation. The answer is not to regulate human activity out of business, but to get a better balance between risk-averse box-ticking, effective investigation and effective penalties.
§ 7.32 p.m.
§ Baroness Miller of Hendon
My Lords,We must get rid of the red tape that comes out of Brussels that is throttling business in Europe".Those are not my words, but those of the Secretary of State for Trade and Industry, Patricia Hewitt, speaking on "Newsnight" on 18 February. In my astonishment on hearing those words from that particular source, I thought how appropriate they were for the debate that my noble friend Lord Vinson has initiated so very well today, and for which we are most grateful, especially for pointing out that one great, unintended consequence is the denial of personal responsibility that is becoming embedded in our culture. That is something that not many of us have ever thought of as an unintended consequence.
I could hardly believe my ears when I heard a Secretary of State of one of the four major departments in the Government complaining about red tape. This is a Government headed by a Prime Minister who, figuratively, did not even wait to perform the dramatic taking off of his jacket when he entered Number 10 for the first time before he signed up to the Social Chapter. The regulations coming out of Brussels, time and time again, are gold-plated by this Government, making the regulations and the directives impact more heavily on our businesses and citizens than they do on our neighbours on the mainland. This Government can do nothing when, far from gold-plating regulations or even making a pretence of performing their minimum obligations, our European partners simply ignore regulations when it does not suit those countries to comply with them.
Let me remind your Lordships, for example, of the way that French farmers are allowed to blockade the Channel ports whenever they are in dispute with their own government—a frequent occurrence—or when they want to prevent imports of British lamb or beef, or the way that the French and Germans simply ignore fiscal rules about government borrowing in the so-called Stability Pact, which they themselves imposed on the euro-zone.
It is not just over the effect of over-regulation from Brussels that Mrs Hewitt should be directing her newly discovered ire. Only 40 per cent of the new regulations introduced since 1998 emanated from Europe. The remaining 60 per cent were home grown. If there were an Olympics for regulation and control, the Government would surely win the gold medal.
Of course, I agree with my noble friend Lord Hodgson that the problem did not start with this Government, but it has certainly become worse. There were 3,990 new regulations in 2003. The record was in 2001, when Whitehall spewed out 4,621 new regulations and then, exhausted by its labours, the numbers were reduced to a mere 3,839 in 2002. However, as I pointed out, they were again on an upwards trend last year. In the six full calendar years of this Labour Government, there have been a total of 23,322 new regulations—almost 15 every working day.
There are two other figures. This flood of regulation is 53 per cent higher than was the case under the last Conservative government, and the cost to business is 305 estimated by the CBI to be up to £15 billion a year. I refer to those two figures, because I last quoted them during Questions on 11 February.
§ Lord Haskel
My Lords, I thank the noble Baroness for giving the way. She may have been unwell, but we did have a debate on regulation some months ago. It was revealed that nearly half the regulations that she has told us about relate to things such as bus timetables and digging holes in the road. They are called regulations, but they are purely formalities.
§ Baroness Miller of Hendon
My Lords, they are certainly regulations. I forgive the noble Lord. I will not answer him in any detail, because this is a timed debate.
At the time when I quoted those two figures, the Minister dismissed them as being,a contentious assumption, which is totally in dispute"—[Official Report, 11/2/04; col. 1100.]But the figure that I gave for the number of new regulations came from Her Majesty's Stationery Office and the figure for the cost to business came from the CBI. Of course, they may be in dispute, but perhaps the Minister will tell us what he believes the figures for the number and cost of regulation to be.
It is not just the quantity and cost of regulation that is the issue. It is the mood created by the environment of regulation with which we are afflicted at a rate of 15 new ones every day. Many of them are regarded by the public as nit-picking, pettifogging and nannying to the extent of treating the public as irresponsible children.
It is not just in Whitehall that regulations and laws are gold-plated and applied without a modicum of common sense. The Data Protection Act 1998 is accepted by everyone as a necessary protection from the over-intrusive invasion of reasonable rights of privacy. However, Humberside police destroyed relevant intelligence on Ian Huntley, allowing him to get a job that he should never have had. We see from today's Daily Telegraph that the Data Protection Registrar has told the Bichard Inquiry that the Humberside police's decision,to delete intelligence of such obvious value … was astonishing".Meanwhile, the Association of Chief Police Officers will tell the same inquiry—and I quote from the newspaper report—that,the Information Commissioner has demanded that police forces delete convictions for violence and sexual assault from computer and intelligence files in the interest of data protection and civil liberties".ACPO accuses the Information Commissioner of,undermining the safety of children".While this unseemly squabble was going on, two very unfortunate children died.
Whoever was right in this particular case, who could and would have complained if the material held had been retained? British Gas cut off the heating to an elderly couple, Mr and Mrs Bates, but did not notify local social services early enough for something to be done to help them, because it was decided that that 306 would be a breach of the Act. The couple both died from hypothermia. Who would have complained if the clerk who made the cutting-off decision had picked up the phone and told the local council?
Last week we read that Okehampton was on the brink of having to cancel its traditional pancake day race because of the cost of insuring the children. I am happy to tell my noble friend Lord Onslow that fortunately, at the last minute, the event was saved by a former pupil who is now an insurance broker and found a more realistic premium.
§ The Earl of Onslow
My Lords, that is the first really good news that I have heard in this House for a very long time.
§ Baroness Miller of Hendon
My Lords, I hope that the Chief Whip sitting on the Government Front Bench will forgive me if I finish a couple of moments later.
§ Baroness Farrington of Ribbleton
My Lords, I thank noble Baroness for the promotion, but there was no vacancy.
§ Baroness Miller of Hendon
My Lords, that farcical decision to cancel is blamed on the current compensation culture that we are importing from the United States of America. However, if insurance companies simply stood and fought speculative claims, the ambulance chasers to whom my noble friend referred in his speech, who incessantly advertise on television, would soon stop. My noble friend Lord Goschen also mentioned them.
It is the stupidity of applying the Data Protection Act and other laws and regulations instead of applying a modicum of common sense—hounding market traders who want to sell bananas by the pound rather than the kilo, for example—that creates this nit-picking atmosphere and the attitude to which I referred. Only today, the same paper reported that the traders' case had been rejected by the European Court of Human Rights. So common is the phenomenon of blindly enforcing petty regulations that the latest edition of the Oxford English Dictionary now recognises the word for it. "Jobsworth" is in the dictionary: "It's more than my job's worth to do this or to do that". One of our local councils fined a resident with a valid parking permit because it had fallen off his windscreen. My own local council—Conservative controlled, I am sorry to say—has just sent me a leaflet warning me that if my car overhangs my parking bay, I may be fined. Are all these people crackers?
This debate is about the unintended consequences of regulation. Despite the somewhat philosophical title that my noble friend has chosen, and because of the examples that he and other speakers have given of the consequences of some regulations in the course of the debate, I am not prepared to acquit the Government of responsibility for all the financial and economic damage, the damage to employment and the effect on the moral attitude of officialdom caused by the never-ending stream of regulations that they issue.
307 At law, we hold everyone responsible for the natural consequences of their actions. It is not as if the Government have not been told of the damage they are causing. We have repeatedly told them from this side of the House; the CBI has told them; the Institute of Directors has told them; the British Chambers of Commerce has told them; the Federation of Small Businesses has told them. Innumerable trade organisations, think tanks, economists and pressure groups have told them. How many times do the Government have to be told of the danger?
In his speech seeking leave to introduce his Bill, my honourable friend in the other place pointed out numerous deficiencies in the present system of regulatory assessment. Several of my noble friends have mentioned that this evening. However, it is a matter of regret to my noble friend, and to me, that the Bill has little, if any, chance of reaching the statute book under the procedure of the other place. However, I join my noble friend in, as he indicated, sincerely hoping that the Government will take the objects of the Bill to heart and that they will voluntarily ensure that they receive full and accurate information of the probable effects of what they do every time a Minister signs his name to an order that has the full force and effect of law. Lastly, but by no means least, I hope that they will stop ignoring and denying the consequences, unintended or otherwise, of each and every regulation that they make.
§ 7.42 p.m.
§ Lord Bassam of Brighton
My Lords, I join in the general congratulations to the noble Lord, Lord Vinson, on the way in which he has brought forward this Motion and has focused an important debate on the issue of regulation. There have been many interesting and good points made during the course of the speeches. It would be invidious to dwell on too many of them.
I thought that the noble Lord, Lord Vinson, was right to say that regulation should be about proportionality. The noble Earl, Lord Onslow, had a good point when he complained about gold-plating, which was a theme that came up on a number of occasions. I liked the question from the noble Lord, Lord MacLaurin, about what regulation should accomplish. It is the right question in the right circumstances. I really enjoyed the trout story of the noble Lord, Lord Hodgson. I think that it was the best of the favourite nonsenses regaled by noble Lords this evening, and is a story well worth retelling.
I also enjoyed the comments of the noble Lord, Lord Plumb. I thought that they were balanced in many respects and that he was right to say that there is poor, good and, sometimes, inappropriate regulation. I think that we are all well aware of that. Of course, the noble Baroness, Lady Miller, is right to say that sometimes we live in a society where there is a denial of personal responsibility. In looking at regulation, that is a very important issue as well.
The noble Earl, Lord Onslow, is undoubtedly right when he said that there was nothing new in this debate. He then gave us chapter and verse about why that is the case. I was very grateful to the noble Viscount, 308 Lord Goschen, for taking my mind back to the Regulation of Investigatory Powers Act and all that it brought forward in its time. I thought that he put his finger on the core of the debate when he rightly said that good regulation requires public confidence. I think that we all agree with that. Of course, the noble Lord, Lord Freeman, with his vast experience in government, was right to say that in some ways our concerns about regulation are a reflection of the fact that we live in a risk-averse society.
All of those were important and well-made points. I welcome the opportunity to discuss the Government's progress on the better regulation agenda. This Government and previous governments have all been concerned about regulation and the way in which it develops. After all, it was a Conservative administration who introduced the Deregulation and Contracting Out Act 1994 and, in some ways, started and inspired this whole debate—a debate that the Government have continued.
This debate takes place against a backdrop of a strong and stable economy. Employment is at record highs, unemployment is at its lowest for more than 30 years, inflation is low and stable, and interest rates are at levels not seen since the 1950s.
The Government's approach to regulatory reform has contributed to this record of success. The UK is at the "forefront of regulatory reform". They are not my words, but those of the OECD. The World Bank's "Doing Business in 2004" survey named the United Kingdom among the top 10 countries out of 130 with the least regulation. Other countries included Australia, Denmark and the United States. The Economist ranked the UK top of the 1997–2001 Entrepreneurial Framework Index of 60 countries that are low on red tape, with Switzerland coming second and the US coming third. An OECD review of the EU found that the United Kingdom has almost the lowest administration cost and fewer regulations for entrepreneurs than any other EU country.
The noble Lord, Lord Haskel, put his finger on the benefits of regulation. I thought that it was very illuminating that he referred to the positive consequences of regulation in creating new markets. Some regulation will always be necessary and desirable. Effective and well focused regulation can play a vital role in correcting market failures, promoting fairness and ensuring public safety. Sometimes we might get irritated with the health and safety culture but we all recognise the importance and value of health and safety legislation and regulation.
For those reasons, the Government are not going to apologise for introducing the first ever national minimum wage, which has raised the incomes of more than 1 million people in poverty, the right to four weeks' paid holiday and improved maternity and paternity leave arrangements. At the beginning of the debate about the national minimum wage, I can remember that we were told that it was going to cost a million jobs in the UK economy. That never transpired and is not likely ever to be the case. We are 309 not going to apologise for seeking to use regulations to protect the environment, to eliminate discrimination and to promote opportunity for all.
Our aim in doing all of this must be to minimise the burdens of compliance for business and the voluntary and community sectors, while ensuring that workers, consumers and the environment are protected. The potential effects of regulation must be fully thought through so that policy meets its purpose and does not end up causing more harm than good.
New regulations should only be introduced when other alternatives have first been considered and rejected and where the benefits justify all the costs, direct and indirect. We are committed that where regulations or alternative measures are introduced, it should be done in a light-touch way. Any policy intervention, and its enforcement, must therefore meet the five principles recommended by the Better Regulation Task Force in 1997. Let us remind ourselves what those principles are: proportionality, which was discussed by the noble Lord, Lord Vinson; accountability; consistency, which we all wish to see; transparency; and targeting.
To ensure that these principles work in practice, in 1998 the Government committed themselves to ensuring that no proposal having an impact on business, charities or the voluntary sector, should be considered by Ministers without a regulatory impact assessment being carried out. Compliance with this process is now nearly 100 per cent, up from 55 per cent three years ago. The Government are committed continuously to improve the quality of RIAs. We have already asked the independent National Audit Office to help to vet the quality of regulatory impact assessments, to bring the measure of independent that Archie Norman is seeking in his Bill in another place.
We recognise that, even where a policy proposal would meet its objectives, there may be wider impacts and unintended consequences that outweigh the benefits of action. That is why the impact assessment must include not only the obvious costs and benefits of the proposal, but also the wider economic, social and environmental impacts. The Government are committed to ensuring that regulatory impact assessments consider all the potential impacts of regulation, including the potential unintended consequences. Only if the benefits of each action outweigh all the costs of doing so should a proposal go forward.
Those who would be affected by a proposed regulation can often add a perspective that might not otherwise have been considered. That is why we have introduced a minimum 12-week consultation period for all proposals that require an impact assessment, allowing the relevant stakeholders to contribute to policy development and flag up any potential unintended consequences of particular proposals before a final decision has been taken.
In bringing in measures, we therefore ensure that we listen to the views of business and meet its concerns. For example, the CBI noted that,the Government's minimum wage legislation has not created an excessive burden because of good consultation".310 We will keep listening. The CBI is to be congratulated on that observation. The Government recognise that there can be uncertainties over the potential impacts of a regulation, such that even if on the balance of probabilities it appears justified beforehand, in practice it is not. That is why each regulatory impact assessment must discuss how the effectiveness of regulation is to be reviewed. We are also making use of new powers introduced in the Regulatory Reform Act to scrap unnecessary legislation.
In addition, we are making greater use of sunsetting clauses—specifying a particular date when a piece of legislation or regulation will expire—where appropriate. Sunsetting clauses have been included, for example, in the Football (Disorder) Act 2000 and the Terrorism Act 2000. I know that there have been calls from opposition parties to introduce sunsetting clauses for all new pieces of legislation and regulation. However, such clauses will not always be justified. A blanket commitment to them would introduce unnecessary uncertainty for business and impose unnecessary demands on parliamentary time.
§ Lord Vinson
My Lords, time is running out and I am rather anxious that the Minister makes a specific reply to some of the points put to him. At the moment, he does not seem to be getting there. Specifically, I wrote to him about and raised in my speech whether it would be advantageous to look at the possibility of setting up a deregulation Standing Committee of both Houses. That would give a wonderful backbone to the better regulation unit, and give it a friend in court, so to speak. I know that it is a fairly novel idea, but I have given him a chance to think about it and I wonder whether he has.
§ Lord Bassam of Brighton
Indeed I have, my Lords, and I shall come to the point.
We are trying to ensure that we look at the issues on a case-by-case basis and that each regulation has a clear reviewing mechanism in place. As well as ensuring that any regulation is strictly necessary and reviewed systematically, the Government are committed to reforming existing regulation. The Regulatory Reform Act 2001 brought in new procedures for scrapping outdated legislation, and last December we published our action plan. It details 650 deregulatory and simplification measures that the Government will deliver, a point raised by the noble Viscount, Lord Goschen.
Since the launch of the original version of the plan in February 2002, more than 240 reforms have been delivered. We have already delivered: licensing reforms which increase flexibility over opening hours, saving business in the order of £1.9 billion in the first 10 years" business tenancy reforms modernising procedures for renewing or terminating business tenancies, saving businesses approximately £6.5 million a year in court costs alone; and removal of limits to the number of partners in a firm, estimated to save around £10,000 per relevant partnership.
311 There is much more that we can and must do, however. Looking ahead, in the private sector we plan, for example, to modernise and streamline the planning processes; make it easier for business to obtain the patent protection essential to protect innovation; comprehensively reform company law, in order to meet the needs of business today; reflect the particular needs of small businesses and create an internationally competitive framework for all UK business; and rationalise government information requests to farmers, in the whole farm approach project, significantly reducing overlapping bureaucracy.
We are also pushing the reform agenda across Whitehall. I think that it was the noble Lord, Lord Hodgson of Astley Abbotts, who said that there needed to be a cross-Whitehall approach, and we entirely agree. We are establishing the panel for regulatory accountability, which will be made up from business and ministerial representation. The Regulatory Impact Unit in the Cabinet Office is there to assist. We have also set up the Small Business Service, which acts as a voice for small businesses within government. And, of course, we set up the Better Regulation Task Force, an independent body with a broad membership. The Government have accepted many of its recommendations, including the introduction of common commencement dates for all changes to employment regulation.
We have appointed a Minister for regulatory reform in each department, so that each department is advised on and understands the impact of measures that it seeks to bring forward. We have established a network of departmental boards responsible for promoting better regulation.
The noble Lord, Lord Vinson, raised the issue of perhaps creating a joint parliamentary committee comprised of Members of both Houses. It is an interesting idea and I certainly do not dismiss it out of hand. However, we already have the House of Lords Select Committee on Delegated Powers and Regulatory Reform, and the House of Commons has its own Regulatory Reform Committee. Those two bodies carry out important work in the area. The importance of that work is respected and acknowledged, not least because, certainly so far as the Delegated Powers Committee is concerned, the Government are almost bound to acknowledge and bow towards its recommendations.
As many speakers said, an increasing proportion of regulation affecting this country originates in Europe. The Government want to ensure that European legislation is subject to the same level of scrutiny as British legislation. That is why we welcomed the European Commission's action plan for better regulation, published in June last year. Specifically, the plan committed the Commission to publishing 42 regulatory impact assessments in 2003, reducing existing legislation by 35,000 pages by the end of 2004 and creating a minimum consultation period of eight weeks.
312 The Government will continue to push for further improvements. The forthcoming Irish, Dutch, British and Luxembourg presidencies are proposing a joint initiative to drive forward regulatory reform across the European Union. Government guidance also aims to ensure that transposition of EU work is done as simply and easily as possible to avoid "gold plating", to which many noble Lords have objected.
I now want to turn briefly to the public sector. Improving public services is the Government's top priority. Better regulation can help to deliver public service. Clearer national targets and rigorous performance management systems are essential parts of driving up standards, but we also need to ensure that we minimise the bureaucracy that those impose, and strip away unnecessary burdens wherever possible.
The Government are pursuing that agenda through, for example, earned autonomy for highly performing hospitals. Three-star trusts can now set their own management cost limits without being monitored by the department or the strategic health authority. Foundation trusts will be freed from Whitehall control, and run instead by local communities and frontline staff.
We are also reducing the number of statutory plans and targets that the public sector has to produce. For example, in the National Health Service we have devolved 75 per cent of funding direct to primary care trusts, and have halved the number of targets that trusts will face from 108 in 2001–02 to 44 this year. By 2003, there had been a 65 per cent reduction in the volume of information returns that the Department of Health required, saving nearly 30,000 man-hours over the past three years. The Health Secretary, John Reid, announced on 10 February a further drive to reduce the number of targets and increase focus on the quality of patient care.
The Government are acting to remove unnecessary burdens from frontline staff, including through Making a Difference reports—and they are making a difference. Nurses, for example, can now request tests and investigations. Patients can now be dispensed 28 days' worth of medicine instead of seven days' worth, and re-registration of nurses returning to practice is now quicker. All such examples show what can be done when we decide to attack the burdens of bureaucracy and move towards forms of deregulation.
I would like to summarise the Government's case on the debate. The Government are committed to regulating only where necessary and only where the benefits of doing so justify the costs. Every proposal having an impact on business must have an RIA which must consider all of the wider costs and benefits, not just the most obvious, as well as the alternatives to regulating. This system helps to ensure that all potential consequences of regulation, intended and unintended, are considered when deciding whether to proceed with a policy proposal.
In addition, the 12-week consultation period ensures that those who will be affected by the proposal have the chance to feed in their views and raise concerns about any potential unintended consequence of the kind we 313 have heard today. We are, as a government, committed to listening to business and minimising the burden that regulation places upon businesses. The Government are committed to reforming existing regulation, whether it is outdated or failing to achieve its policy objective. We are drawing on the expertise of both the private sector and front-line public sector staff in seeking areas for reform. We are also drawing on the expertise of private-sector secondees and the independent Better Regulation Task Force.
This comprehensive strategy for better regulation is recognised by the World Bank, the Economist, and the OECD as among the world's best, with the United Kingdom at the forefront of regulatory reform. It is this strategy that has helped to make the United Kingdom one of the best places in the world to do business, contributing to our enviable record of record employment, low inflation and interest rates and the longest period of economic expansion on record.
§ 8.1 p.m.
§ Lord Vinson
My Lords, time is up and I want merely to thank all those who have taken part in the debate. I thank the Minister, after a long day, for listening so attentively. I am sure he is impressed by the level of expertise and experience of regulation, over-regulation and unnecessary regulation. I hope that the debate generally will raise the whole level of the regulatory framework in this country greatly to the benefit of its citizens. I beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.