Regulatory Enforcement and Sanctions Bill [HL]

My Lords, one of the difficulties in any discussion about regulation is that it polarises those who believe that everything is bad and those who believe that regulation is the answer to every maiden's prayer. We have observed some examples of those extremes this afternoon, albeit expressed with great courtesy. The reality is that the least regulated countries are also the poorest and least healthy because, for example, there are no adequate regulations to ensure safe water or safe transport. On the other hand, overregulation has always been a characteristic of totalitarian states, Stalin's Russia, Hitler’s Germany and Mao's China being three frightening examples. Regulation, like taxation, is the price that we pay for democracy and civilisation, and we need regulation to protect our citizens from harm inflicted on them by others, including the state—but also, in this complex modern world, to help citizens to understand their obligations towards each other and, for example, towards the environment. I welcome the Minister’s balanced assessment of regulation in his opening speech, but I also view with suspicion Whitehall's capacity to measure the savings so substantially and precisely—where it gets a figure such as £124 million defeats me. Equally, I treat the British Chambers of Commerce’s off-the-cuff £80 billion with a pinch of salt. The Bill, therefore, must be judged on its capacity to improve the quality of existing regulation and enforcement and to root out overregulation and bad enforcement. In this respect, it would be uncharacteristically modest of me not to refer to the five principles of good regulation that I helped to establish when I was chair of the Better Regulation Task Force—not the deregulation taskforce—a few years ago, and which are generally endorsed by both the UK Government and the European Union. They are accountability, proportionality, consistency, transparency and targeting. By and large, if those who create and enforce regulation adhere to those principles, they will achieve good regulation and good enforcement. At the same time, these principles will expose overregulation and bad enforcement. The proposal in the Bill for a Local Better Regulation Office is a good one because most citizens experience regulation at local rather than national level, particularly through local authorities and their agencies. But I hope that this new quango is not just a creation of central government, following the usual flawed top-down approach. The local LBRO must also be empowered to challenge regulatory proposals from the Government before they are introduced, and be satisfied that such proposals are effective and necessary. Indeed, I hope that the LBRO spends at least as much time taking issue with the regulatory proposals from central government as it does improving the regulatory improvement and poor performance of local authorities. Will the Minister elaborate on that? The Government are no doubt aware that in creating the LBRO they are setting up a new bureaucracy to add to existing bureaucracies—a long established Whitehall stunt. How independent will be the LBRO be? Will the board have a strong element of outside members to prove its independence? The Bill intends to strengthen the primary authority principle. That certainly will be welcome to national businesses because they will only need regulatory clearance from one authority rather than 400. As the noble Lord, Lord Borrie, pointed out, the home authority principle has been in existence for 30 years and most businesses have found it a good one. My worry, which is shared by the noble Lord, Lord Cope, is about regulatory burdens that have to be carried by small companies rather than large ones. They will have to go through the process at local authority level with all the problems there. Indeed, many large companies welcome regulation as a way of reducing the competitiveness of smaller businesses, because the cost of compliance is much higher for smaller businesses compared with large. It is important to make sure that this Bill does not increase the disadvantage suffered by SMEs and concentrates on improving the way that the 400 local authorities deal with regulatory issues for those small companies. There is another serious problem for small businesses. Unfortunately, all the evidence suggests that when dangerous regulatory failures occur in, for example, the food industry, they are most likely to be traced to small rather than large businesses. That is because large businesses have more resources to train their staff and have a huge interest in maintaining the reputation of their brands. Smaller businesses often get into trouble because they do not understand their regulatory obligations. Will the Local Better Regulation Office help in tackling that problem? The Bill intends to give regulators new sanctioning powers. Businesses will view that with some suspicion, but I am glad to read that regulators will no longer be allowed to retain for their own use fines that they recover from manufacturers. It has always seemed wrong that regulation should be a source of income, and therefore incentive, to enforcers. They should be allowed to cover their costs, but only that. I notice that the regulator will be asked to tackle unnecessary burdens imposed in carrying out their functions. But is that not like asking McDonald's to ban hamburgers? This aspiration on unnecessary burden has been around even since the day of the noble Lord, Lord Sainsbury, but to little effect. The answer is for legislators not to create the unnecessary burdens in the first instance. This Government have probably been the most prolific creators of new laws in the nation's history. Too often they have preferred to introduce new legislation rather than try and make existing legislation work better. Can we be sure that this legislation is absolutely necessary and that its effect will live up to their aspirations? If the Minister and the Government can justify the need for this Bill and demonstrate that the cause of better regulation will be enhanced and the excesses of overregulation reduced, I believe businesses will go along with it. But let me conclude by referring to the most important principle of better regulation—proportionality. I remind business and government that despite our many shortcomings, Britain is, according to the OECD, among the least and best regulated countries in the world, as the Minister said. There is no room for complacency, but businesses should not blame their competitive strategy shortfallings on regulation. Those shortfallings usually lie elsewhere and most are self-inflicted, rather than the fault of government.