---

Legislative and Regulatory Reform Bill

moved Amendment No. 33: After Clause 1, insert the following new clause- ““DUTY TO EXEMPT SMALL BUSINESSES FROM REGULATION (1) Where an order made under section 1 has as its purpose the reduction (as opposed to the removal) of any burden, or overall burdens, the Minister of the Crown must consider whether a total exemption for small businesses from a such burden or burdens is appropriate. (2) If the Minister does not consider such exemption appropriate, he must submit a report to Parliament at the same time as the draft order is laid before Parliament explaining the reasons why he has come to this conclusion. (3) For the purpose of this section ““small businesses”” refers to businesses that fall within the criteria of a small group as set out in section 249(3) of the Companies Act 1985 (c. 6) (qualification of group as small or medium-sized).”” The noble Baroness said: Small businesses are vital to the UK economy. There are about 3.8 million in the UK, of which 1.6 million are sole traders. They account for 99 per cent of UK firms, generate more than half the total UK turnover and employ 56 per cent of the private sector workforce. Regulations can have a disproportionately large impact on small businesses because they usually do not employ a regulatory specialist and the costs of, for example, employment regulation are absorbed across fewer employees. The National Audit Office report goes on to say that, "““Departments must therefore pay particular attention to the potential impact of their proposed regulations on small businesses””." The amendment seeks to put this recommendation in statutory form. When using this order-making power to reduce burdens, a Minister should always consider the appropriateness of whether a small firm exemption should apply. In this way, the order-making power, if used to reduce regulations, would serve as a trigger to initiate a small firm exemption. If the Minister chooses not to take advantage of the opportunity to exempt small firms, then he must account to Parliament with his reasons for not doing so. As far as I am aware, when preparing its regulatory impact assessments, current practice is for the relevant department to consult the small business section of the DTI, to get its agreement on its impact assessment on small businesses. The National Audit Office report of March 2005, on page 21, said that, in four cases out of eight in the sample, the small business section had not been given enough time to produce a considered response. Can Minister confirm whether this unsatisfactory state of affairs has been rectified? The report went on to cite an example of where small businesses have not been properly considered. The Department of Health seemed to have been a major offender: "““The SBS told us that the Department of Health did not enter into negotiation and asked the SBS not to provide comments for the RIA for the National Care Standards Commission Fees and Frequencies of Inspection 2003-04””." It cited the example of the regulations regarding the recovery of NHS treatment costs. The Department of Health identified that one of the effects of this regulation would be an increase in insurance premiums. According to the National Audit Office, the department made no attempt while preparing the RIA to calculate the increase in premium for an average small business or to assess whether it will be disproportionately affected. So, there we have it—clear evidence from an independent source that small businesses can and will get overlooked. We need to take the opportunity that this Bill presents to put something in concrete that will reassure the small business community that they will not get overlooked. I beg to move.