Oral statement to Parliament

Vince Cable speech to British Chambers of Commerce

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Introduction Thank you for the invitation to speak at this event, and your very warm welcome. The Chambers of Commerce have played a key …

Introduction

Thank you for the invitation to speak at this event, and your very warm welcome.

The Chambers of Commerce have played a key role preparing me preparation for the position I now hold in government. While my experience as chief economist at Shell was invaluable, with some 93,000 staff it wasn’t exactly an introduction to the world of the smaller enterprise.

The Richmond Chamber is a really lively group on my own home turf, and has a knack for homing in on issues that matter- they started a small business forum last October and have been pioneering. Together bringing local business together with banks and the sources of finance.

I greatly appreciated the welcome you gave when I became Business Secretary, almost a year ago. You asked me to “push British business to the forefront of the new coalition Government’s entire thinking”. Since then, I must have written dozens of articles, delivered hours of speeches, and attended any number of regional roundtables, factory visits and Whitehall meetings with that intention in mind.

From the very first days of the Coalition our strategy for the economy has been clear: growth must come from the private sector, from businesses investing, hiring and exporting. And all the evidence suggests that a large part of this will come from smaller businesses, which are significantly more likely to hire staff, innovate, and lead the country through the recovery. The people in this room.

The government’s job is to do all it can to help: cutting back regulation, improving access to finance in the aftermath of the credit-crunch and helping the workers of tomorrow develop the skills that they, and you, need.

We have a difficult line to tread here. I am now in charge of a Department that in an earlier incarnation employed me as special adviser, in the 1970s, during the very heyday of government intervention. At the time the government diverted enormous resources around the country on the false premise that the state could create plans superior to the market. I learned enough in those days under John Smith to warn me against picking winners.

But this does not imply an uncritical embrace of an equally foolish laissez faire approach. The government can make a huge contribution to business and the economy - if it can only focus on those areas where it can make the most difference. Even during an era of fiscal austerity, we can a big difference.

That is why I have worked so hard to find resources for more apprenticeships, for new technology innovation centres, and for a green investment bank that promises to transform the financing of low carbon infrastructure.

But today I want to talk about how we are working to prevent the government actively damaging the economy with its heavy-handed interventions.

Micro-business exemption

Just over two weeks ago the Chancellor and I published the Government’s Plan for Growth along side the Budget. This is the first output of the Growth Review, a rolling review programme which will continue for the life of this Parliament.

We want to change the mindset in Whitehall - to inject the same sense of focus and urgency that we saw in the Spending Review, challenging every department to demonstrate how its policies help rather than hinder economic growth.

It hasn’t been easy. When you are trying, simultaneously, to make Britain wealthier but greener and safer; more welcoming and open to the world economy but less reliant on immigrants; with more houses and a protected environment; better educated and healthier with lower taxes and a balanced budget … you can stumble upon trade-offs. But we think we have a good balance.

One of the key announcements has been the introduction of a three year moratorium on new domestic regulations for smaller companies or those starting up.

Let me explain this policy. Our starting position is not “all regulations are wrong”. Sometimes regulations are what make a market possible, and enable the trust required between consumers, workers and businesses.

But what we have heard, consistently, from smaller businesses in particular is that they are tired of continuously having to adjust themselves to the government’s latest priority - to find out about some new procedure, some unfamiliar form or website to visit.

When this goes on too long, the effect on enterprise can be chilling. Owner-managers of micro businesses estimate that they spend between one or two days per fortnight on regulatory issues. Big companies, by contrast, can hand over the problem to a dedicated compliance department. Our own surveys at BIS suggest that small businesses soon start fearing even worse regulations than actually exist, and too easily become prey to offers of expensive help.

What we want to say is “This must be stopped”.

You shouldn’t need to worry about the government’s latest interventions, if you are a small company or just starting up.

You want us to focus on growth - well, this is how we want to help you to focus on growth.

And let us remember that nearly 96 per cent of businesses in this country employ less than ten people - providing over a third of private sector employment, or nearly 8 million jobs in the UK. When you add in the start ups, this is a policy that should have an immediate effect on the whole economy.

Deregulation programme

But I understand that it is not just new regulations which we need to control. Businesses, particularly new businesses, are often shocked by the sheer extent of existing rules, be they to do with health and safety, tax, environmental standards or employing people - and how they seem to have been designed without any sense of proportion.

Or how they seem out of date, reflecting needs and priorities that are no longer relevant to the economy or society.

And often they reflect an entirely misguided view of human nature - a lack of trust in the commonsense of ordinary people to choose the right way to behave. The sort of ‘statism’ that goes against the liberal view of life, one based upon empowered, responsible individuals willing to take decisions for themselves.

Yes, I know what you are thinking: you’ve heard it before. Wars against regulation are as old a theme as regulation itself. What new approach do we offer?

My response is that we are launching our review, not from Whitehall, but starting from the viewpoint of the people affected by the rules. The consumers, the citizens, the small businesses who actually have to carry out instructions, and can tell us whether they are working how they are meant to.

The problem is that to the experienced practitioner - from the civil servant drafting the language, through the inspector visiting premises, down to the lawyers weighing in during a dispute, the rules can seem to make sense. For people whose job is regulation, there doesn’t seem to be a problem. And if they are the only people we talk to, we won’t see the problem, and it will just get worse.

That is why we are launching a website to contact directly the people who understand best what the costs of regulation are. In other words, you.

We shall display, sector by sector, the stock of regulations on the basis that if it cannot be justified it should lapse.

This won’t work without your help.

In some cases, you will want to say “That isn’t needed - scrap it”. Surely, within the 21,000 statutory instruments we counted there are regulations that have come to their natural end. Do we really need regulations as specific as the ‘Indication of Price (Beds) Order’?

The presumption will be clear: regulations will be presumed guilty unless proven innocent.

Sometimes you will agree with what the regulation is trying to achieve - but your understanding of how things really work will mean you know there is a better way of doing it. So tell us.

Or you will find there are pointless additional requirements that don’t really help. Why, for example, do so many rules that are meant to protect the public come with ridiculous demands to keep records? It reveals an obsession with proving compliance, over getting things done in a better way.

And sometimes you will know of rules that are enforced in a totally over the top way, that utterly fails to reflect its original intention. Daft rules that demand that parents have endless criminal records checks if they are to accompany children on a trip to the zoo, for example.

All of which should remind us that too great a reliance on government to create and enforce rules can corrode the freedom of individuals to find their own way of doing things.

This is going to be a rolling programme. Every four weeks we will be publishing, on Red Tape Challenge, the regulations that have an impact on a particular area of our lives. We will start with the retail sector - an area strongly represented here today.

We will then take action. And this time we will presume that you are right; we will assume that the regulations should go. Unless Ministers can robustly defend the need to keep an unpopular regulation, departments will get rid of it.

We want to be the first government in history to leave office having reduced the overall burden of regulation, not increased it.

Wider regulatory measures

We have also announced a number of changes to regulatory measures to help reduce burdens on business whether or not they are micros.

The tobacco display advertising ban will not be applied until 2015 for small newsagents.

We have decided not to proceed with plans to extend of the Right to Request Time to Train to businesses with fewer than 250 employees. Don’t get me wrong, I believe passionately in the value of training. A lack of intermediate skills is a serious weakness for the UK economy. Companies deliver far more training than the government, and often know far better what is needed.

However, the processes around requesting the right to time to train are undoubtedly burdensome, particularly for smaller companies without a dedicated human resources department for managing it. The approach of our government is rather to see how companies behave first, before reaching for the blunt regulatory instrument.

We will not extend the right to request flexible working to parents of 17 year olds. Again, flexibility is greatly valued and good companies will foster it. But the problem is that the form filling is onerous and costly.

The Equality Act dual discrimination rules will not be brought forward; we will consult on removing requirement for businesses to take reasonable steps to prevent persistent harassment of their staff by third parties.

Over this parliament we will maintain a continuous review of employment law in order to reduce the costs to businesses of compliance while still ensuring workers’ rights are respected. You know, and I know, that the vast majority of businesses treat their staff with respect - it is after all in their best interests to have motivated staff and mutual trust in the workplace. But the way the rules are enforced can have the perverse effect of dissuading the good employers from hiring.

For example, we inherited a situation in which workplace disputes were increasingly being settled through employment tribunals - over two hundred thousand claims in the last year. They should be a last resort, not the first option considered. There is a real risk that the fear of tribunals may force worried employers to settle rather than face the time and expense of weeks required to defend themselves.

So we want more mediation and a longer period of qualifying employment before unfair dismissal claims can be brought - two years rather than one. And we think it reasonable that there should be a cost to starting a tribunal case, particularly if it encourages people to think twice. So we are consulting on introducing a fee.

We also will implement proposals from Lord Young’s Review of Health and Safety, including bringing in much simpler risk assessment, the registration of health and safety consultants, combined inspection programmes to reduce SME visits and taking action to constrain no win no fee legal fees.

We will develop a new strategy for pushing the EU to regulate less, including urging the three EU institutions to ensure that new burdens on business are offset by savings elsewhere, which will help to reduce overall costs for UK business.

These measures build on the ‘one-in, one-out’ rule that we introduced last year - the idea that every department has to stop and apply a cost to any putative new regulation - and then find existing costly regulations to scrap if they want to go ahead.

It sounds like a pledge that could only interest a Whitehall connoisseur. But you may be pleased to hear that I am on the receiving end of a gratifying degree of complaint about One In One Out from my Cabinet colleagues. The complaint is that by insisting they work out the costs of what they are doing, I am introducing even more bureaucracy.

A bureaucracy to fight bureaucracy - the beginning of some sort of satire by Kafka. Or Joseph Heller.
But I prefer to call it “A taste of our own medicine”. Forcing government departments to think twice is a cost we should be willing to pay it if means hundreds of thousands of small businesses saved the trouble of hours of extra form filling.