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Legislative and Regulatory Reform Bill

My Lords, regulation has become one of the great economic topics of our day. In some ways we should be grateful that this is the case, rather than having to fret about more serious matters such as high unemployment, high inflation and high public sector deficits, although I suspect that the economic clouds which are building up at the present time may put regulation in better proportion. Nevertheless, if Sir Digby Jones, the outgoing director of the CBI, is to be believed, British business is about to be overwhelmed by an avalanche of red tape. When I was chairman of the Government’s Better Regulation Task Force, I was required to review the whole regulatory environment and I came to a number of conclusions. Yes, in a modern, affluent democracy there is a high level of regulation to protect consumers, workers and investors from being harmed or exploited. This has its roots in the great dynamic economy of Victorian England. In modern times, environmental regulation has, in my view correctly, been growing rapidly. Few would argue about the benefits of the clean air legislation of the 1950s which transformed the air of our great cities. A great American judge, Wendell Holmes, once remarked that taxation is the price we pay for civilisation. He might as well have said the same about regulation. However, when I last looked at this matter a few years ago, Britain was in fact the least regulated of all the major OECD countries, including the United States. One reason why international financiers rush to do business in London and why this city may well overtake New York as the global centre for international finance in the foreseeable future is the light, flexible, but also effective regulatory environment. So Sir Digby Jones’s conventional wisdom that British international competitiveness is at risk because of over-regulation does not, in my view, hold water. Maybe the real answer to our low productivity lies with his own members, who continue to invest less in technology and training than their major competitors elsewhere. Interestingly, my experience of most new regulation in recent years have been demands coming mainly from the middle classes, whether it be the risk-averse consumers whose fears are cleverly exploited by the Daily Mail or the environmental doomsters whose anxieties are championed by the Guardian. I should like to compete with the noble Lord, Lord Sainsbury of Preston Candover, in going down memory lane and throwing in a few regulatory reminiscences of my own. I am delighted to hear about the Government’s and the EU’s continued commitment to the principles of good regulation—proportionality, transparency, accountability, consistency and targeting. I sometimes wake up shouting those words in the night. They were in fact devised by me in a deckchair one summer’s afternoon in Yorkshire, in a desperate attempt to find a way through this regulatory nightmare. Little did I believe that a matrix decided for my own benefit should achieve such widespread acceptance. The third problem is that we are not very good at getting rid of redundant regulations which might or might not have served a purpose when they were first introduced but which are clearly irrelevant today. The journalist Simon Jenkins provided me with one such gem. In the 19th century, a regulation was introduced which required that in public places—hotels, pubs, and so on—there should be two doors between lavatories and the rest of the building. At the time that was justified in order to reduce the risk of cholera. A century and a half later, this regulation still flourishes, even though the risk it sought to mitigate has long since gone. The problem is that to get rid of most of this nonsense—and there is plenty of it—it has been necessary to use time-consuming primary legislation. This is anathema to government departments and Ministers, whose greatest ambition in life is to introduce new legislation rather than getting rid of old legislation. The competition between departments to get Bills into the Queen’s Speech is another reason for the legislative morass which exists today. A modern parliamentary law-maker in full flood is the embodiment of self-satisfied egocentricity, but not, I believe, closely concerned with the realities of daily life. The Regulatory Reform Act 2001 was introduced to facilitate the elimination of redundant regulation, but it lacked the necessary teeth to tackle the problem. In its original shape, the present Bill was much too draconian, passing far too much power to the Executive, especially dangerous when the latter, on occasions, show scant respect for parliamentary democracy. But Parliament should be much more concerned with the Government’s zeal for new regulation and should breathe a not-very-convincing sigh of relief when they propose to deregulate. It seems to me that Britain has three areas of concern about regulation. First, we have, especially in recent years, created far too much new legislation which, in turn, requires new regulations. The Government have, I gather, enacted no fewer than 42 new Bills related to crime with, at best, questionable effect. There has been a plethora of new legislation related to health and education. It seems that Ministers and senior civil servants see new regulations as the solution to every problem. Pity the enforcers, trying to keep up with the latest torrent of regulations; they are as confused and bewildered as those at the receiving end of the regulations. I have no doubt that many of the problems endemic in the Home Office and the health service today are caused by all this regulatory complexity. It is time that the Government stopped introducing new legislation and concentrated instead on improving the effective delivery of existing regulations, including, as the Bill should address, the elimination of bad or redundant regulation. Secondly, our senior civil servants believe that falling foul of a judicial review, which exposes shortcomings in their wonderful legislative skills, is the most humiliating experience known to man. As a result, they go to extreme lengths to close every conceivable loophole when drafting legislation. I remember, when helping to get the Bill to introduce the minimum wage going, that in order to thwart me, a senior civil servant in the DTI triumphantly brought up the example of a Stoke-on-Trent pensioner who was working half-time doing a newspaper round and would not be protected by the Bill as it stood. To his dismay, we overrode him, and as far as I know, things are all right in Stoke-on-Trent. Sadly, many Members of both Houses of Parliament delight in such obscure, hypothetical possibilities and, as a result, add unnecessary complications to our laws. Britain suffers particularly from this gold-plating disease, when it affects the translation of EU directives into British law. Many of the regulatory problems attributed to the EU are of our own making. Just look at the mess in the Rural Payments Agency. I believe that the amended Bill introduces sufficient checks and balances to meet these democratic concerns, and I hope that, if passed, it will make a significant contribution to a more effective regulatory environment. I am also pleased that the Government are implementing Philip Hampton’s recommendations, and I welcome their intention to place on a statutory footing a code of practice for regulators. Changing the way in which regulators approach the way they regulate will have a huge impact on the ground, especially for small and medium enterprises, where the effects of regulation are most felt. I do, however, share the concerns of the noble and learned Lord, Lord Lloyd of Berwick, about Clause 1(3)(d), which leaves the Government with draconian powers. The Bill does not address the much more serious problem of internal public sector regulation, created by the control freaks in a fruitless attempt to run everything from Whitehall. The most serious victims of red tape in this country are the hapless head teachers, GPs, prison governors, immigration officers, Rural Payments Agency staff, local authorities and regional quangos. These poor people are overwhelmed by demands from central government. A vast amount of time is being wasted as they seek to satisfy the expectations of those who create a multitude of targets and initiatives at the centre. A lethal mixture of ministerial self-indulgence and Civil Service risk-aversion has created this state of affairs, and this will continue as long as Britain clings to the most over-centralised, top-down form of government in the democratic world. That is the real challenge for radical reforms, but I fear that it will not be taken up.