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Government Regulation

Before I came to the House, I was fortunate enough to do a job that I loved. I was a lecturer at Cranfield School of Management. Over the past seven years I have helped scores of my students to start their own businesses, and have helped scores of entrepreneurs to enable their businesses to grow profitably. The businesses range from Moonpig.com, an online greetings card business, to Real Burger World, a slow-food burger company in south London which I heartily recommend to Members. I also advised many companies whose representatives took advantage of Cranfield’s business growth programme. When I talked to those people I heard many complaints about cash flow, about late payments from suppliers and customers, and about the difficulty of growing a business while keeping it profitable. Better regulation, however, was not the subject of the biggest or the most important complaints. My students came from all over the world. Many chose to start their businesses in Britain rather than in their home countries because our barriers to start-up are among the lowest in the world. Being an academic, I did not rely on my own words. I showed the students reports from the Organisation for Economic Co-operation and Development to prove my point that our low-regulation environment would prove helpful to them. Britain is also attractive to companies starting their businesses because of our relatively well-developed venture capital markets, both the private-equity and the more formal markets. It is time-consuming for companies to find private equity, but it is easier here than it is in other European countries. Our banking sector is more competitive than those in other countries. Owner-managers often told me that what mattered most to their businesses was a sympathetic bank manager—or finding one after disposing of an unsympathetic bank manager. We have heard a good deal about small businesses today. They are the engines of innovation in our economy. When I worked in a high-tech university, I saw how the teaching company scheme—later rebadged as the knowledge transfer partnerships—enabled universities and businesses to spin out new technologies and help the country to innovate. Under this Labour Government, the science budget for biotechnology and nanotechnology is nearly £3 billion, compared with a meagre £1.3 billion in 1997. Fostering an enterprise culture is vital to Britain’s economy. In my constituency we have a healthy mix of large and small companies, and unemployment is at a record low at 2.5 per cent. Businesses are enjoying business rate relief. Rural businesses are enjoying rate relief of up to 100 per cent. in villages containing fewer than 3,000 people. Many of them are enjoying 100 per cent. tax write-offs for their investment in new technologies, in research and development and in computers. The enterprise culture that we have heard so much about is flourishing—at the moment—but regulatory reform should always remain a goal of any Government. Such reform should have clear public policy goals. It should allow small businesses to compete effectively against large companies, and allow them to compete for public contracts; we in this country have not always been successful in that regard. Such reform should also ensure that smaller and larger companies have equal access to finance. However, it should also remember that business takes place in society; that the environment should not be polluted; that fly-tipping instead of paying for waste disposal is a crime; that employees should have training in machinery and health and safety; and that no construction project or ““dream building”” is worth the life of a worker who is killed or crushed by machinery. One person’s ““regulation”” is another’s health and safety. Regulatory reform in the UK must take into account three issues. First, we must ensure that regulations coming from the EU do not have a disproportionate impact on our small businesses, an issue about which we have heard a lot this evening. I am delighted that one of our priorities for the EU presidency is to lead the way on better regulation, and to ensure that fewer regulations come from Brussels. We have been successful in taking that message to other European countries, and there is a willingness to learn and to share our experience. But I also welcome legislation from Europe that helps our small businesses to compete better in a global marketplace. In an increasingly integrated world, we must ensure that our small businesses can grow internationally, as well as nationally. The owner-manager of one of the small businesses that I used to deal with ran a container business. A change in EU regulation meant that for a short time, his was one of the few companies in the UK—indeed, in Europe—producing EU-compliant oil drums. That was clearly wonderful news for his business, because for a short while he was able to enjoy that rare thing that most businesses dream of—a monopoly. In our efforts to make the best, most environmentally friendly products in Europe, legislation can in fact act as a market opportunity, in which our world-class businesses can compete and thrive. Indeed, the right hon. Member for Wokingham (Mr. Redwood) told us how telecoms benefited from the opening up of EU markets in 1998. Secondly, if we are to achieve better regulation, regulatory reform must try to simplify existing regulation. The March 2005 Budget included a radical overhaul of regulation. We have heard about the twin-track process—one in, one out—whereby any legislation that imposes regulation is accompanied by a compensatory measure to simplify legislation. Thirdly, we must reduce the burden of inspection across all services and businesses, public and private. I am very glad that our excellent councils are being relieved of some of the comprehensive performance assessment inspections to which they have been subjected. A risk-based approach to inspection means lighter inspection for businesses with a proven track record, and a heavier regime for those that continually fail to meet social, environmental or regulatory standards. That is not bad for business; it is good for society and it is good for good businesses. Let me return to the companies that I spoke to in my seven years helping people to start their own businesses. They all told me that the most important thing that a Government can do for them is to keep interest rates low and to keep their borrowings down. They remembered the banks knocking on their doors in 1991, when interest rates hit 10 per cent. and peaked at 15 per cent. They remembered 1992 to 1996, when 1,000 businesses a week went bust. They do not want a return to Tory boom and bust, to"““15 per cent. interest rates, sky-high mortgage arrears, negative equity, bankruptcies, entrepreneurs giving up the ghost on private-run companies and a lot of people losing their jobs. I don’t think there was a family in the country that didn’t experience at least one of those anguishes.””" So said the right hon. Member for Wokingham in a speech to the Bow Group on October 26 2004. Those companies want an educated work force. They want to give something back to the society that buys their products and services. Let us put regulation in its place; it serves us, not the other way round. Small businesses are run by human beings with families who understand the pressures of the modern world. When the Government were introducing maternity rights, one owner-manager said to me, ““All this talk about not employing pregnant women—I’d hire someone who was nine months’ pregnant if she was the best person for the job.”” Small business owners live in the real world, and they want real-world solutions. They know that without maternity leave and without women having babies, they would have no customers for tomorrow’s products and services, and no staff to make or market them. There was much talk from Conservative Members that the minimum wage would cost British jobs, but they were wrong. Does giving new fathers two weeks off to learn how to change their baby’s nappy mean the end of the business they work in? Not if the business is any good. Does giving employees the right to take four weeks’ paid holiday mean that companies will plunge into the red? Not if the business is any good. This is not bossiness gone mad, just good business. I want better regulation and smarter regulation. Instead of seeing it as an added layer of bureaucracy, we should see it as a smarter way of working. The Government are trying and succeeding on deregulation. We have gone beyond exhortation. I welcome the measures that we have taken to boost this country’s economy and productivity and to create a healthy, thriving small business sector.