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Address in Reply to Her Majesty's Most Gracious Speech

My Lords, I suppose that someone had the unenviable task of coming back down to earth. The dog that did not bark during the recent election campaign was, of course, the European one. At least, if it did, it barked pianissimo. Perhaps that was understandable but, now that the election has come and gone and the next national electoral event may be the prospective referendum, we should do well to attend to the European dimension. It is particularly relevant for industry and economic affairs. So many issues of current concern to the business community lead back to Brussels or Strasbourg. There is a wide spectrum of potential opportunities and risks. At one end lie the positives, including a reinvigorated pursuit of the Lisbon goals, a successful Brussels-led conclusion to the current trade round and a services directive that genuinely opens up the bulk of the European internal market that remains closed. At the other end lie the negatives, including the potential loss of the UK rebate, loss of control over tax policy or loss of flexibility in our labour markets. It is hardly surprising that there is an equally wide spectrum of opinion among business people on whether the commercial benefits of the UK's full engagement in the European Union outweigh the attendant costs. Many, like myself, are convinced that they do. Many would prefer to be a good deal more detached. Many more are yet to be persuaded. One thing is sure: no one can now claim to speak for the whole of British business when it comes to matters European, least of all a former president of the Confederation of British Industry, such as me. There is just too much diversity of opinion. Paradoxically, I find from talking to business friends and colleagues across the rest of Europe that they have no such doubts about the value of the UK's full engagement. Indeed, we sometimes underestimate how much the business community in the rest of the EU looks to the UK to take the lead in encouraging an environment where business can prosper, bringing with it renewed economic growth at higher levels of employment. The Government have an uphill battle to fight for the next year or so to bring about a similar consistency of view among UK business people, but it is a battle that needs to be engaged because, although the business community has no vote, it influences public opinion. Indeed, in European affairs, it is difficult to imagine the electorate as a whole taking a positive view if business is consistently negative. It is not too difficult to persuade business people of the benefits of free and fair trade or of an open internal market within the EU; those are self-evident gains. Much more challenging is to allay the justifiable fear of over-regulation. EU regulation lies at the heart of business disquiet. It is compounded by the fact that UK governments have proved themselves no mean regulators on their own account. The prime ills of over-regulation are cultural. Regulation by definition means rules. Rules mean bureaucracy and risk-aversion—the antithesis of enterprise. Companies react to regulation by becoming bureaucratic themselves, as I know only too well, and they lose their cutting edge. That cultural cost is significant and often unrecognised. There is a systemic problem here. Ask a businessman to list the top three regulations that he would like withdrawn and, often, he will be at a loss for a reply. What he knows is that it is the cumulative effect of a multiplicity of regulations that is the main burden, rather than a few specific rules where the shoe pinches. The system is designed to make regulation far easier than deregulation and the only answer is to redesign that system to redress the balance. I listened attentively to what the Chancellor of the Exchequer had to say on the subject at last night's CBI dinner. Although it was good to hear a recognition of the problem and of the prospect of a Bill, I fear that the proposals that the Government advocate do not get down to the root causes of over-regulation. They fail to nip the problem in the bud. A risk-based approach to inspections, the merging of regulatory bodies and departmental objectives on red tape are all desirable, but there will be no lasting solution without the mandatory use of sunset clauses, rigorous economic regulatory impact assessments—hence the opportunity that the noble Lord, Lord Haskel, was seeking to justify regulation in the first place—and equally rigorous post-audits of whether the claimed benefits of a regulation are achieved in practice. There can be no reliance on a regulator's self-denying ordinance. Regulators themselves need to be open to proper independent scrutiny and properly accountable to an independent body. If the UK has a long way to go to achieve the right balance between market intervention, enterprise and economic growth, EU institutions have even further to go. If the UK does not show the way, it is hard to see how other like-minded countries will achieve the momentum to succeed. As luck would have it, the directorate in the European Commission that is the focus of the business community's greatest concern—the Directorate for Employment, Social Affairs and Equal Opportunities—is one of those that has furthest to go in instituting a sensible regime of regulatory restraint. It also exemplifies a common trait among regulators that the longer that survive after establishing sound principles, the more they get drawn into excessive detail in the application of those principles. The devil lies in that detail. In the European context, the danger lies in endemic breaches of the principle of subsidiarity, as regulation grinds ever smaller. The principles of equality of opportunity and sound employment practice are quite properly a matter for the EU. They are well established and understood. But the necessary fine-tuning of their practical application can be achieved only at national and local level. We can take the current controversy over the individual opt-out from the Working Time Directive. The only way of achieving an outcome that meets the needs of both business and individual employees is to take decisions voluntarily and locally. A uniform maximum 48-hour working week, imposed at European level, simply cannot achieve the same degree of fine tuning, by definition. There are at least two ways of dealing with such a problem, both of which would find a great deal of support in the business community throughout Europe, not just in the UK. The first is to ensure that regulatory bodies are not allowed to survive their usefulness. In fact, there is a lot to be said for giving all regulators a fixed term. The other way, which could have a wide application across EU directorates, would tackle the question of subsidiarity head-on. Each new piece of business regulation would be subject to a straightforward subsidiarity test. The test would be required to show for each new regulation that there were greater economic benefits to be derived from its application at European level rather than national level. If that could not be demonstrated, the presumption in favour of subsidiarity would apply. What could be more reasonable? My point is a simple one: sound and proportionate regulation is a prerequisite of our international competitiveness. One of the greatest hopes of the business community is that the UK will vigorously pursue systemic change in its approach to regulation with that in mind. One of the greatest fears of the business community is of over-regulation from Europe, whereby the principle of subsidiarity goes by the board. The hopes and fears can and must be fully addressed in the next Parliament; let us not lose the opportunity by being insufficiently radical.