House again in Committee.
Before we get to AmendmentNo. 31, I would like to make a brief correction to a statement made by the noble Lord, Lord Waddington, in the debate on Amendment No. 30 when he suggested that I was taking a different line from that taken by my honourable friends in the House of Commons. I have since then checked on the debates and votes on Report in the House of Commons and I refer the noble Lord, Lord Waddington, to the House of Commons Hansard reports for 15 and 16 May. On 15 May, at col. 737, my honourable friend David Heath made what could be regarded as an ambiguous statement indicating possible support. However, I would refer the noble Lord to the speeches of Mr David Howarth at col. 751 andMr Heath again at col. 755, which confirm our opposition to an identical amendment. When we voted on it the following day, as is shown in cols. 945-48, we voted with the Government against the amendment in exactly the same way as we have done in your Lordships’ House today.
I wonder whether it would be helpful if we had a Motion before the Committee before any further debate takes place. It is clearly a matter for the Committee and not for me, but this exchange could continue in the course of a later amendment when we have a Motion being debated before the Committee. Therefore I would like to call the noble Baroness, Lady Wilcox, to move Amendment No. 31.
I thought it would be convenient to dispose of this matter now. It may present slight technical difficulties. I am not for a moment suggesting that the noble Lord has done anything to his discredit at all, but it seems it would be helpful to get this out of the way, particularly as there are no other amendments which are at all similar to Amendment No. 30.
I wonder if I can take it that the noble Lord is speaking to this amendment. I am most grateful to him for having made his statement. The last thing that I would wish is to mislead the Committee in any way. Of course I accept that the line he has taken today corresponds with the line taken by his colleagues in the other place. I want to make it absolutely plain that I accept entirely what he has said. I would add only that I am most grateful for the support of two Liberal Democrat Peers in the Division Lobby a short time ago.
After Clause 1, insert the following new clause-
“DUTY TO REDUCE REGULATION
(1) A Secretary of State must publish annually a list of all regulations for which his department is responsible which lay a burden on any activity, service, body, voluntary group or business, and at the same time publish an estimate of the total compliance cost of each such regulation and of the average time taken by each person affected by the burden to comply with each regulation.
(2) The Secretary of State shall have a duty to reduce by10 per cent the number of regulations established under legislation for which his department is responsible within two years of the coming into force of this Act.
(3) At the end of the period of two years after the coming into force of this Act, the Secretary of State shall lay a report before each House of Parliament detailing his proposals to reduce by a further 10 per cent the number of regulations established under legislation for which his department is responsible and the timetable by which he expects to achieve that target.”
The noble Lord said: I hope that your Lordships will forgive me if, by way of preface to this amendment, I refer to the remarks made by the Minister when this Bill was discussed in Committee a week ago. I return to this matter only as it is of such fundamental importance and because it bears on this amendment.
The Minister said:
“The power to amend or revoke secondary legislation is less important, as departments will always have a power to do this in any event”.—[Official Report, 3/7/06; col. 119.]
That has made me think, as it has the noble Earl, Lord Onslow. Unfortunately, hard as I ponder, I am now even less able to understand this Bill. As departments already have the power to amend or revoke secondary legislation, why, if the Government are so keen on deregulation, are Ministers not falling over themselves to revoke great swathes of expensive and useless legislation?
The main argument against the Bill is the reluctance to give Ministers the power to bypass Parliament. But, how much deregulation is dependent on amending or repealing primary legislation? I should be grateful if the Minister could give some examples of the primary legislation that would be removed under these powers. There must surely be a long list of Acts or the Government would not have given so much time to this Bill. Can the Minister say what proportion of envisaged deregulation will be achieved through the repeal of primary legislation and what proportion of deregulation will be achieved through the repeal of secondary legislation, for which, as the Minister has told us, the Government already have powers?
If one of the purposes of the Bill is to enable primary legislation to be amended or removed without going through the normal legislative process, then, clearly, there must be adequate protections to avoid the abuse of power. I am still unable to see how adequate safeguards can be introduced without losing that flexibility to repeal and amend legislation, which this Bill seeks to provide. I apologise to your Lordships for returning to that point, but it bears repetition.
The Minister has confirmed that power already exists to deregulate secondary legislation. Since that power is not being used, it is important that pressure is applied to Ministers to make effective use of both existing powers and the powers to deregulate that the Bill proposes to give them. There will always be other projects and initiatives that will be more attractive than the tedious job of getting rid of regulations. I refer your Lordships to the comment in the 20th report of the Delegated Powers and Regulatory Reform Committee, which stated that,
“it is our opinion that the block to regulatory reform is departmental priorities rather than the “burden” test in the 2001 Act”.
Given the record of Ministers on deregulation, the Bill will be pointless if there is not a statutory duty on the Minister to deregulate. Although it is not included in the amendment, it is important for there to be a time limit within which action must be taken. We can return to that when the Minister’s reaction to the amendment is known.
The idea of creating a target for deregulation was strongly endorsed by the Better Regulation Task Force, which stated that target setting was,
“a robust method for the government to improve its control over the flow of new regulation and a driver to reduce the burdens imposed by the stock of existing regulation”.
My view is that the amendment’s suggestion of a reduction of 10 per cent over two years is an extremely modest ambition, and if the Minister were to say that such a reduction was inadequate, I would accept that as a valid criticism. I wished to suggest a minimum target that was easily obtainable.
I refer again to the Better Regulation Task Force. It recommended the Dutch model of deregulation, which involved introducing a target for reducing administrative costs. The Netherlands chose a target of 25 per cent over four years, with some limited flexibility across different government targets. If the Dutch approach were used, as well as the benefit of increasing productivity and growth of business and a mechanism for increasing the efficiency of government, the task force estimated that an investment of £35 million would potentially increase gross domestic product by £16 billion. The report recommended that the Government set a target by May 2006 for reducing the administrative burden. The Government’s response was that targets would be set by the time of the Pre-Budget Report 2006. Can the Minister confirm that such targets will be forthcoming and that progress on the implementation of the recommendation is on course?
I understand that the Government accepted in full all the recommendations of the Less is More report so I am sure that the Minister will welcome the amendment. I beg to move.
I was somewhat confused when I read the amendment. Having heard the noble Lord move it, I am a great deal more confused. The amendment states:
“A Secretary of State must publish annually a list of all regulations”
that lay burdens on businesses and people. That is to be inserted after Clause 1, which does not refer to regulations but to burdens imposed by all legislation. Does the noble Lord intend to restrict his amendment to burdens that happen to be imposed by secondary legislation, or is he using the word “regulations” in a more general sense in relation to burdens imposed by any legislation? If he is using it in the second sense, the task that he seeks to impose on the Secretary of State in subsection (1) of the amendment is absolutely enormous, because Clause 1 refers to burdens imposed by any legislation.
During last week’s debates, which, unfortunately, I could not attend, the Minister very much limited that to burdens imposed by regulators and so on. But that is not what the clause states and that is why it is so dangerous. A burden imposed by any legislation could be a burden imposed, for example, by a landlord and tenant Act which states that a landlord or tenant must repair this, that or the other, or by the Sale of Goods Act, which states that the seller must be responsible for the quality of the goods. Such burdens can be altered under Clause 1(2). You could make a regulation under Clause 1 that stated that, henceforward, landlords need not do any repairs and tenants must do them all; or that, henceforward, vendors need take no responsibility for goods and it would just be bad luck if you buy something that does not work.
Such burdens are imposed by virtually all legislation; so, if the Secretary of State were annually to have to publish a list of all the burdens imposed on individuals by any legislation in the country, he would merely be made to recite the entire statute book. On the other hand, if the noble Lord does mean regulations in the normal sense, I do not see why he is concerned only with burdens imposed by statutory instruments and the like, and not by burdens imposed by primary legislation. Some of those may need to be reduced, while some certainly do not need to be reduced at all. If the noble Lord is really including in the totality of the 10 per cent that is to be reduced all the obligations imposed on individuals under, say, landlord and tenant, sale of goods, employer, and safety at work legislation, trying to cut the statute book by 10 per cent every two years seems a somewhat ambitious target, even for those who are keenest on deregulation.
The quality and value of the speech that we have just heard makes me regret that the noble Viscount was not here on the first day of Committee. I suppose that the amendment is meant to be taken seriously but it is rather frivolous in its consequences. I suppose that it could be a probing amendment but I am not sure what it is probing. I do not think that having in a Bill a target of a 10 per cent reduction in the number of regulations established under legislation and so on is what Hampton or the Better Regulation Task Force, or whatever it is now called, had in mind at all. As the noble Viscount indicated, the duty would have astonishing consequences in a short period of time if a department had to comply with subsection (2).
As for publishing a list of all regulations, the noble Viscount has already pointed out the ambiguity surrounding those regulations. Is the amendment referring to legislation in general, as is dealt with in Clause 1, including subordinate legislation? As for “burdens”, almost every conceivable piece of legislation can be described as a burden.
To be serious for a moment, surely we must accept that, whatever its faults, the Bill is concerned with continuing what was begun in 1994 when Her Majesty's Opposition were in government to reduce the burden of regulation on business and so on. One wants the Bill to be more effective than the previous one, from which arose a considerable spate of deregulatory orders, in order to reduce the burden that I have just described. Asking departments to publish lists of regulations seems to me to serve no useful purpose, and it is rather surprising that Her Majesty's Opposition should think that this is an amendment of value.
I, too, am puzzled and confused, as the noble Lord, Lord Desai, was the other day. I was very interested in the contribution of the noble Viscount, Lord Bledisloe. I think that the confusion arises from the Government because, on the one hand, they say that they want to pursue better regulation. At one time that might have been “deregulation”, but that is a dangerous description and so they have shifted towards “better regulation”. On the other hand, they say that they have not been able to do that with the 2001 Act and nor could other governments do it with the 1994 Act. Then the Government say that they have opened a portal. We have heard about that several times. I think that it is run by the Better Regulation Executive, although I am not sure. It has made 330 proposals for deregulation, simplification, amendment and removal. These have included administrative recommendations as well as recommendations which I believe will almost exclusively concern secondary and not primary legislation.
This is where the confusion comes in. We find ourselves talking as though it will be impossible to follow the Government's programme if either the 2001 Act is not amended or this Bill is not enacted. I sincerely believe, and I am sure the Minister will put me right if I am wrong, that it will be possible to put in place by existing legislation a large percentage of any deregulatory, simplification or amendment programme—the departmental plans to which the noble Lord referred. The 1994 and 2001 Acts did not do much to achieve a reduction in the regulatory burden and nor will this Bill.
It is probably a pity that we have chosen the word “burden” because, as has been pointed out, a burden works both ways. To give one example, there used to be a simplified employer’s deduction card and a year-end return, which involved putting in one form. You now have to submit three forms, which contain a great deal of information, including whether your employee worked for a foreign company for 30 days in the year. That is completely irrelevant to complying with the Revenue’s intentions. There are many other examples which come from administration and secondary legislation. Unless and until the Minister can clarify how much primary legislation the Government need to amend to achieve the deregulatory regime to which he referred and how much they can achieve with existing legislation, the confusion will remain.
I am drawn very much to the analysis to which the amendment has been subjected by my noble friend Lord Borrie and the noble Viscount, Lord Bledisloe. Of the three parts of the amendment, subsection (1) gives me most concern. We have been discussing burdens and the quantity of regulation that can impact on a business, a voluntary organisation and the public or private sectors and so on. When I read this part of the amendment, my heart sank because I had thought that noble Lords opposite were beginning to get to grips with what the Government are trying to achieve. Subsection (1) asks us to consider producing a list of all regulations—I am not sure whether it is secondary or primary legislation or both, or whether it is all legislation in the past or all future legislation—and,
“at the same time publish an estimate of the total compliance cost of each such regulation and of the average time taken by each person affected by the burden”,
to fill in forms, prepare and publish prescribed codes or policies or otherwise to comply with each regulation. That is a massive undertaking. What sort of bureaucracy would a Government need to deploy to fulfil the requirements of the amendment? I cannot begin to quantify it and I doubt whether the noble Lord, Lord Howard of Rising, can begin to do so either.
Is that the sort of thing that we want to ask of civil servants who are tasked with the business of improving the quality of regulation—or deregulating, depending on which term you prefer? I say not. I cannot see the value in that exercise. I cannot see what it would do to hone and perfect the improvement of regulation or to reduce the burden of regulation within our legislative and statutory framework. I cannot see it working.
The noble Lord, Lord Howard of Rising, then goes on in the amendment to talk about target setting and about having robust methodology. We argue that we already have in place a robust examination of regulations. That is why we have a regulatory impact assessment and why departments are asked annually to go through their stock of regulations. I do not think that we need the prescriptive and bureaucratic approach which the noble Lord, Lord Howard, wishes on us in order to achieve that objective.
Regulations exist for good reason. They ensure that we protect citizens and provide a sensible framework within which our businesses, public services and voluntary organisations can operate. We want our public servants to use their finite resource to root out the unnecessary bureaucracy and to deal with it rather than investing more of their time in producing lists and writing more reports for Parliament, whether on an annual or a biennial basis, whichever approach is adopted.
I understand that the Opposition might have thought that this amendment would achieve an improvement to regulation, but I cannot see how they can demonstrate that it will. We are the first Government in the UK to face up to the challenge of identifying and measuring costs on business, charities and voluntary organisations. Each year, as I think I have said before, departments will publish detailed information on the administrative costs of complying with government regulation and their analysis and plans for reducing both those costs and other regulatory burdens. The Government will put in place a stretching but, I think I can argue in the end, an achievable target for reducing each department’s administrative costs over time.
At present, departments are reviewing their regulations and preparing simplification plans, taking into account suggestions for change that have been made by those who have made representations to us from the business, voluntary and charity sectors. Those plans will be published annually because they focus on burdens that are experienced and real to organisations rather than burdens that are imagined as the fruit of the whole stock of legislation and governance. These measures will include a commitment to reduce regulatory burdens on business and the voluntary sector as well as the public sector. The plans will be published at about the same time as the Pre-Budget Report. Departments are also obliged to report on their better regulation work as part of their annual reports. I made that point during an earlier debate.
We do not need prescriptive and inflexible targets on the statute book for a reduction in bureaucracy. Progress to date and our commitment to this agenda should be visible to all. For example, Her Majesty’s Revenue and Customs is already undertaking a measurement exercise. It has already announced a commitment to reduce by at least 10 per cent the administrative burden on business of dealing with HMRC forms and returns, over a five-year period. It also aims to reduce the administrative cost on business of dealing with audits and inspections by10 per cent over three years and by at least 15 per cent over five years.
This amendment is not necessary; it is over-prescriptive; we are already on the right track; we are already working in the direction of reducing the burdens about which the noble Lord, Lord Howard of Rising, is concerned. It would provide us with a straitjacket from which we could not escape and which would, as far as I can make out, provide us with a work stream that could last more than several lifetimes.
The noble Lord, Lord Howard of Rising, asked: what proportion of deregulatory work needed amendment to primary legislation? I should respond to that, although it is an almost impossible question to answer. We intend to try to use all the tools we can to deregulate; that is what this legislation is about. We can also use guidance. We may want to use primary legislation for different measures; and we may want to use the secondary legislation for different measures, including orders under the Bill. The Bill enables us to have a more streamlined procedure, a more exact procedure and one that does not become too bogged down in the process, but which gets to the heart of what is required to take action that is effective against things that perhaps have been on the statute book for some time, that are no longer necessary, and that are imposing burdens on business and other organisations. That practical, hard-nosed way of dealing with things is what we require. This legislation will enable us better to perfect that.
The noble Lord, Lord Howard of Rising, will not have heard a direct answer to his question because I do not think there is one. However, we are attempting to achieve, and we are beginning to achieve, a practical and hard-nosed approach to tackling real problems with regulatory burdens that exist for people out there in the real world, rather than theoretical burdens that the noble Lord seems to think can be solved by a massive expansion in bureaucracy and a rather heavy-handed approach to quantification.
The same as in Clause 2. The point is that Ministers already have very substantial power, as the Minister pointed out, to reduce the regulatory burden and they are simply not using it. To try to get them to use that power they must have some form of compulsion. If they do not have it, they will not use it. It is very simple and I cannot believe that the Minister cannot understand that and, ultimately, agree with me. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
After Clause 1, insert the following new clause-
“REMOVAL OF REGULATIONS WITHOUT FULL COMPLIANCE ASSESSMENT
If a Minister of the Crown is unable to estimate the average burden in time or cost imposed on persons or businesses affected by a regulation he has introduced, he shall make an order to remove or reduce that regulation.”
The noble Lord said: This amendment looks at the process of assessing the impact of regulations. The regulatory impact assessments that accompany pieces of legislation laid before either House are a useful tool for forecasting where the costs and impacts of policy changes will fall in future. I see from the Cabinet Office website that as at June 2005, there was 100 per cent compliance by government departments with the regulatory impact assessment process. That is fine, as far as it goes. A form of measuring device has been created but that on its own serves no purpose. It is all very well measuring the quantity of a liquid, but the problem is that too often the Government do not check whether the liquid is good whisky or bad poison.
The effects of regulation are what matter. Using the device to measure subsequent performance against the original intention will show whether the legislation is having the intended effect. The purpose of the amendment is to put a duty on Ministers to examine the impact of regulations after their introduction. If the assessment is unable to estimate the effect of the regulation, clearly there is no point in the regulation and it has to be removed automatically.
I understand that since 2003, the National Audit Office has carried out independent evaluations of regulatory impact assessments. On page 32 of its last report, the Evaluation of Regulatory Impact Assessment Compendium Report 2004-05, it stated that nine out of 10 regulatory impact assessments in its sample,
“discussed monitoring and evaluation but these discussions were very brief and vague”.
It went on to state that,
“complex monitoring procedures were sometimes in place but these were not reflected in the regulatory impact assessments”.
Will the Minister say whether the National Audit Office’s recommendation that regulatory impact assessments should describe the monitoring process in more detail is being complied with? It is pointless to create regulations and not to examine properly whether they are achieving what was intended. I beg to move.
We understand the thrust of where the noble Lord is coming from with this amendment. I hope, as my first task in this Bill, I can persuade him that his approach is flawed and that what is already in process effectively meets what he seeks to achieve.
The noble Lord is effectively saying that regulations which the Government are unable to measure in terms of time and cost should either be removed or reduced. That position seems to have no regard to possible evidence of the benefits of introducing the regulation. If we accepted that, the noble Lord could find that important protections for consumers and other groups could be removed. That is why the Government require regulatory impact assessment for new regulations, including consideration of non-regulatory options. All regulatory proposals must be accompanied by a regulatory impact assessment, and major proposals are scrutinised and require approval by the Panel for Regulatory Accountability. The purpose of RIAs and PRA scrutiny is to ensure that the costs and consequences of regulatory proposals are reasonable and proportionate to the benefits. Exemptions for any group or sector, including small businesses, are considered on a case-by-case basis, with Ministers making their decision transparent through the RIA/PRA process.
One of the key principles of better regulation is light-touch implementation of policy proposals. The amendment runs counter to that principle, adding an unnecessary and bureaucratic step to the policy-making process. RIAs already consider the impact of any regulation on small and medium-sized enterprises and are subject to scrutiny by officials within the Better Regulation Executive. The BRE is currently developing proposals to improve the effectiveness of RIAs. The aims will be both to improve the clarity with which costs and benefits are presented and to streamline the RIA requirements, making them easier to use throughout the policy development and implementation cycle—the point that the noble Lord was particularly pressing. The BRE intends to consult on its proposals shortly.
On the cost of business, charities and voluntary organisation complying with existing regulations, no UK Government have understood what the estimates of the administrative costs are until now, as my noble friend has just outlined. As part of one of the most ambitious regulatory reform agendas in the world, the Government have faced up to the challenge of identifying and measuring the total administrative costs placed on businesses, charities and voluntary organisations by existing government regulation.
Noble Lords have just heard that each department will publish detailed information later this year on both the administrative costs of complying with government regulation, and their plans for reducing these costs and other regulatory burdens. The Government will set stretching but achievable targets for reducing each department’s administrative costs over time. To put such an amendment in the Bill would be too prescriptive, giving no regard to important protection the regulation may exist to provide. It would not take account of what the Government are already delivering on measurement of administrative costs on the regulated, an approach wholeheartedly supported by the business community:
“We are encouraged that the effort to plan and then implement reductions in administrative burdens is already underway, through a nationwide survey to establish how much time and money businesses must expend to demonstrate compliance, and to identify which regulations impose the greatest burdens”.
Those are not my words, but those of key representatives of business in a letter to the Government earlier this year.
While it seems a sensible amendment on a prima facie basis, it would cause uncertainty within the regulatory environment. This Government have for the first time completed an exercise to identify and measure the administrative costs of government regulations on business, charities and voluntary organisations. We will set meaningful targets for reducing those costs, and recognise that everything on the statute book, whether originating from this or other administrative legislative output, has been measured in terms of time and cost. Each government department has identified its existing stock of regulations through the administrative burdens reductions exercise, evidence that will indicate where the costs are, so that they can then take action to reduce them.
In summary, I welcome the noble Lord’s intent with this amendment, but do not agree that it is an effective way of achieving the right outcome. I invite him to withdraw it.
The Minister has given a long and interesting reply. My noble friend was asking a simple question: will the Government look at individual regulations to see whether they have worked? In other words, he is asking for post-legislative scrutiny. If it has not worked, my noble friend suggests that that regulation is no good and should be withdrawn. It is a fairly simple question. The amendment may be the wrong way to ask it—I see that—but do the Government mean to look at regulations, see whether they have operated as they expected and report on them?
To start with, I do not think that is what the amendment asks. I understand the thrust of what was asked when the amendment was moved. The approach being taken is a continual review of regulation. When a regulation has been introduced with an impact assessment, part of the ongoing departmental process will be to keep burdens, costs and regulation under review.
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 the 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.
I support my noble friend. Some 28 years ago the noble Lord, Lord Ezra, among others, and I spoke of the problems of small business—they had many. What has changed? Burdens on small businesses have increased substantially since then, especially the paperwork, which, most unfairly, requires hours of work. I hope the Government will ease the many burdens imposed on small businesses by exempting them from many of these proposed regulations.
While the tabling of this new clause indicates that the Opposition are as eager as we are to help small businesses, the amendment is not required and therefore the Government cannot support it.
One of the main policy objectives at the heart of this Bill is that orders made under the power in Clause 1 will help to reduce regulatory burdens, including burdens on small businesses. The proposed new clause is therefore unnecessary. All regulatory proposals must be accompanied by a RIA, and major proposals are scrutinised and require approval by the Panel for Regulatory Accountability (PRA).
The purpose of RIAs and PRA scrutiny is to ensure that the costs and consequences of regulatory proposals are reasonable and proportionate to the benefits. Exemptions for any group or sector are considered on a case-by-case basis, with Ministers making transparent their decision through the RIA/PRA process, as we have just discussed.
One of the key principles of better regulation is light-touch implementation of policy proposals. This amendment runs counter to that principle, as did the previous one. RIAs already consider the impact of any regulation on small and medium enterprises and are subject to scrutiny by officials within the Better Regulation Executive. The chair of the Small Business Council, Julie Kenny, is invited to attend meetings of the PRA. That seeks to ensure that small businesses have a voice on the committee and that the regulatory proposals scrutinised take full account of the impact on small businesses.
The Government are already reducing regulatory burdens on small businesses. For example, we are exempting nearly 900,000 companies from audit requirements on their accounts as a result of raising the annual turnover threshold from £1 million to£5.6 million, saving companies at least £94 million a year. We have introduced regulation updates: a one-page “see at a glance” look at new regulations which enable an SME to decide whether a new regulation will affect it, without having to wade through a lengthy document, saving time and money. We have introduced a 12-week minimum implementation period for new regulation, giving implementation guidelines to SMEs, to enable them to prepare for new regulation at least three months before it is due to come into effect.
The DTI simplification plan alone identifies how it will reduce the burdens on businesses by more than £1 billion over the lifetime of its five-year programme.
The Company Law Reform Bill, the heart of which is deregulation, will deliver savings to businesses of some £250 million a year. That includes an estimated annual saving of £100 million for small businesses.
The requirement in the Bill for consultation on any proposed order will also allow those affected by any proposals to have an opportunity to put their case to the Government. The Government will take these views into account before a draft order and explanatory document are laid before Parliament. The explanatory document must give details of the consultation, representations received and any changes made as a result of those representations. Those representations from small and medium enterprises, as with other representations, will of course be reflected in this explanatory document. There is a clear overlap between what this amendment would require and what is already required by the Bill in the explanatory document.
This Bill is about reducing and removing unnecessary burdens, not increasing them. The amendment will make the procedure more onerous, diverting valuable resources away from actually delivering the necessary reductions in red tape that businesses, the public and the voluntary sector are crying out for.
Small businesses are the backbone of the UK economy—we share a view on that. There are a record number of small businesses, nearly twice as many as there were a generation ago. This Government champion small businesses. We recognise their huge importance to the UK economy. My statistics state that 58 per cent of the UK’s private sector workforce is made up of small enterprises; and small business, as has been recognised, accounts for over half of the UK’s turnover—some £1,200 billion.
The Bill has widespread support, including from the Federation of Small Businesses and the Small Business Council. It is difficult to see how the proposed new clause would add anything to the mechanisms this Government have already put in place to support small businesses. Small business, as defined, is in danger of putting a straitjacket on the approach which the Government would take on this, because the definition of “small or medium-sized enterprise” may differ according to the requirement of the particular regulation. A Companies Act definition may be appropriate if one is considering exemption from audit or from some other more detailed requirement of financial reporting. It is not necessarily always the key test for other requirements. To put such a straitjacket in the Bill is unhelpful. On the basis of the evidence provided, I therefore urge the noble Baroness opposite to withdraw this amendment.
I have listened to the Minister's reply. I am very pleased that the small business organisations he referred to seem to have confidence in the Government’s approach. I do not have that much confidence. I have run a small business and know how often these things sound wonderful on paper but can take an awful lot of time to do. Anything that goes near a government department always seems to take a lot more time.
I am delighted that the Minister has now joined us and has given the noble Lord, Lord Bassam, a slight breather as he seemed to be batting totally on his own. It is very nice to have him here. He will know that many of the previous amendments centred on the fact that we want provisions in statutory form.
We, like the Government, are very keen that this Bill is an improvement on the 2001 Act. That sounded good, too, in its time, but we are worried that there is not enough force behind it. If the Minister is staying with us, he will see more amendments like this where we are trying to get more robust and tougher legislation to call departments to account and to get them to Parliament—so that it forces their hands.
I will read very carefully the Minister’s response to this amendment. For the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.