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Economy: Enterprise, Taxation and Manufacturing

My Lords, I, too, am grateful to my noble friend Lord MacLaurin for initiating this debate. All my political life I have been concerned about small businesses, both those continuing businesses, which are always likely to remain small, and new start-up businesses which have the potential to grow much larger. We need them both. I am concerned particularly about the weight of all types of regulation but in this debate I want to discuss the ever-increasing complexity of the tax legislation. Two of the ministerial posts that I had the honour to hold laid particular emphasis on small businesses so I know from personal experience the reaction when one says to a market trader, ““I’m from the Government. I’m here to help you””. It is not always positive. However, as the noble Lord, Lord Bhattacharyya, said, when small businesses are asked what they want from government, they usually answer first, ““Just get the Government off our backs””. That is, of course, a plea for deregulation. However, I know the difficulties involved in that. First, new regulations are usually designed to remedy some perceived ill and are supported by those who have been hurt by it. The ill may be tax avoidance or something else. Secondly, when regulations or tax breaks are designed to help small businesses, they have a cut-off point which is difficult to decide and inevitably creates a boundary wherever it is set, making life difficult for businesses just above it. Thirdly, special provisions designed to help small businesses have to be known to them. Sometimes it is complicated to choose between alternative schemes. I have in mind particularly VAT schemes. Fourthly, the effects of regulations are not usually all one way. Most benefit some and cause difficulties for others. The useful report of the noble and learned Lord, Lord Davidson, on EU regulations came up with a very interesting example of gold-plating regarding MoT tests for cars. The EU directive says that at the least we should test cars more than four years old every other year. In fact, for many years we have tested cars more than three years old every year. That clearly is a burden and a cost for motorists over and above the EU minimum. However, if we cut this regulation down to the EU minimum, we would immediately cut out 50 per cent of the work of garages doing MOT tests, which would damage all those garages. It is an interesting example of what can happen. I understand the difficulties. Nevertheless, it is very important to make progress on deregulation. I realise that the Government prefer to speak about better regulation, rather than deregulation, but what we need are fewer regulations. This House is dealing with 12 statutory instruments today—eight by the affirmative and four by the negative procedure. That is just one working day, and most negative instruments never come to us. The noble Lord, Lord, Filkin, and his colleagues on the Merits Committee have a mountain of statutory instruments to filter for us every week. Every business needs a Lord Filkin to filter which regulations are important and which apply to it. The Government announced last year the administrative burdens reduction exercise. It is now more accurately called the administrative burdens reduction programme, which is better. It would be interesting to know how that is getting on. The first problem in setting targets for reducing regulations is how to measure regulations. The National Audit Office has done some good work in this field; I was struck by how familiar one set of comments in a recent report was. It said: "““Businesses rated the following activities as particularly burdensome: keeping up-to-date with changes in existing regulations””—" My noble friend referred to that earlier— "““the time it takes to go through the whole process of complying; the lack of information about which regulations apply; and finding information and guidance””." Those comments reflect the stability that my noble friend Lord MacLaurin spoke so strongly and wisely about a few moments ago. Given my views on the sheer weight of regulations, I was struck by a passage in the Government’s draft legislative programme for the next Session of Parliament which was published last week. The Lord President read out these words from the Prime Minister’s Statement: "““Advancing our enterprise agenda, the Government will consult on the idea of regulatory budgets—for the first time giving departments that seek new regulation a strict annual limit on what they can impose””. [Official Report, 14/5/08; col. 1005.]" That sounds very interesting and a new idea, but what does it mean in practice? As it appeared in the draft legislative programme, I duly studied the great document that came out at the same time, setting out the details of the various Bills that are to be in our programme for next year. It is wonderfully clear on most of the proposals, setting out the main elements of the coming legislation—the perceived benefits, the process of consultation and the timing. But I cannot find anything in the 80 pages about the regulatory budget idea. I assumed, as it was listed in the legislative programme, that there will be a Bill, a statutory limit on new regulations from departments. That is all very interesting, but I am not sure how it would work. What would the sanctions be? Would Ministers go to jail if they had too many regulations, or pay a fine? I do not think it is really going to be like that. In any case, there are difficult questions to be addressed, such as how the limits are to be expressed and the problem that the NAO has referred to of measuring regulations. In some ways, a crude measure is the number of pages of regulations. It may be crude, but it is not altogether out of this world to think of that as a measure because, after all, the number of pages that a business must read to get on top of the various regulations matters. Also, the impact assessments try to measure the costs of complying once you have read the regulations. I do not expect the Minister to set out definitive answers to all these questions today, but I hope that she can indicate the meaning of that sentence in the legislative programme. The Minister recognises that enterprise is stifled by overregulation because in a recent speech to the Trade Association Forum, she set out a reduction in the burden of regulation as the first, essential criterion for enterprise to flourish. She is, anyway, the Minister responsible for the Better Regulation Executive. Government words, consultations and studies in fewer and better regulations are a vital component of fostering enterprise, but their actions and their effect will really matter. I hope that the proposed regulatory budgets will help, but, so far, we cannot be sure.