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Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)

The British Chambers of Commerce


Thursday, June 03, 1999


Other speeches

Before I turn to my main subject today - regulation and what we can do to reduce the burden of regulation on business - I want to wish the BCC all the very best for the forthcoming launch of its Enterprise Campaign.

I am sure that this campaign will make a real difference to attitudes to business in this country. The campaign?s goals are entirely in tune with the Government?s own views on the importance of creating a more enterprising, more dynamic Britain if we are to succeed and prosper in the next century.

I also want to take this opportunity to thank Chris Humphries for the vision, commitment and energy he has put in to raising the profile of small business and the importance of enterprise.

Turning to regulation, I intend to make three significant statements on deregulation during June. Today, I want to make the first of these.

The measures that I will announce today will save business tens of millions of pounds and will benefit tens of thousands of businesses up and down the country.

I want to leave you in no doubt about my own position on what the Government should and shouldn?t do when it comes to regulation. And to set out the immediate action we are taking to cut red-tape as well as some of my longer term goals.

It is important that we keep the issue of regulation firmly in context. Regulation is only one factor which influences the workings of a business in a modern economy. There are many other important areas requiring urgent attention: for example

We need to create a culture of enterprise, changing attitudes towards business, seeing more people taking the initiative and starting out on their own. The BCC?s own campaign will play a vital part here.

And we need to focus on skills. Within existing businesses, we need to invest in our people and to develop their skills, giving them the up-to date managerial, marketing and technical know-how they need to survive and prosper in increasingly competitive markets.

We need to improve the competitive position of our economy. The Implementation Plan for the Competitiveness White Paper will do precisely that.

The Small Business Service will help to implement the Working Families Tax Credit, which is itself a reward for work through the wage packet. This will be good for the individual and for the family. It will also be good for business.

Getting regulation right is undoubtedly and rightly a major priority for this Government.

We are determined to define a new role for Government based on a fundamental understanding of the role both business and Government can and should play in the economy.

It is businesses create jobs and wealth.

It is entrepreneurs that take risks in the face of uncertainty and open up new markets.

Governments should and must not hinder them, but work to ensure the market functions properly and contributes to a strong, just and fair society.

There can be no return to the outdated interventionism of the old left. The corporate state was tried and it simply did not work.

But neither did naive reliance on laissez-faire. This led to destructive individualism and a crippling obsession with what Government should not do.

This Government intends to play a far more positive role in the market place, working with businesses large and small in their efforts to develop products, gain customers and make profits; here, in Europe and the rest of the world.

First, we need to ensure that we create the right macro-environment, by creating the conditions for stability which will give businesses and individuals the confidence to invest for the future.

Second, we need to create a dynamic market environment in which real competition rewards innovation and encourages responsible risk-taking. This means creating the right framework of competition and minimum standards, but then leaving business free to do what it does best - creating jobs and generating wealth.

An essential element of this strategy must be to avoid burdening business with unnecessary regulation.

This is particularly important because burden of regulation falls most heavily on small business. Small businesses are amongst the most dynamic, enterprising and ambitious firms in the country. Taken together, small and medium sized businesses are the biggest creator of new jobs and increasingly, the major driver of economic growth.

For many small businesses, their very size is a major advantage. It gives them the flexibility, creativity and incentives they need to succeed. They are well placed to respond to demands of knowledge driven economy and the growth of e-commerce. But size comes at a price, in particular they have less capacity to cope with new regulations and have less access to advice and guidance.

Regulation

It is clear to me that the Government needs to rethink its approach to regulation if we are to make a real difference to business.

In the past, there has been a tendency to introduce overly detailed and prescriptive regulations, which were often far from user-friendly. Or to respond to the needs of big business, while paying less attention to their impact on growth creating small businesses.

Too often regulations have been introduced with too little consultation and too little warning. And subsequent enforcement has then been patchy.

Finally, Whitehall has also paid too little attention to the cumulative burden of regulation.

Despite its much trumpeted commitment to deregulation, the previous administration?s track record on this was not impressive.

Every day, as I come into the office, I pass a photo-gallery of my predecessors as Secretary of State. Almost all of them will have vowed at one stage or another to cut regulatory burdens on business. But the fact that we still discussing this issue today shows that these have all too often been empty promises.

All Governments seem to fall back on regulation, not least because the instinct to regulate remains strong in Whitehall culture.

Shifting this culture and improving our overall performance on regulation is something I take very seriously, as does the Prime Minister.

We are clear that there will be a place for regulation to achieve certain goals; for example in balancing the interests of different parts of society from the environment to the health and safety of workers and the protection of consumers; or for tackling fraud and corruption, guaranteeing public confidence in new products and services and creating new markets by setting common technical standards.

When used sensibly and sensitively regulation can work for business as well as those who would otherwise be directly at risk.

But we must look again at how we achieve these legitimate goals without imposing onerous and burdensome rules and procedures for business.

Across Whitehall we are putting in place stronger systems to assess the potential impact on business of any new regulations which might be proposed.

The Better Regulation Task Force is leading a cross-Government drive to do away with unnecessarily burdensome or out of date regulations.

In enforcement, the Health and Safety Executive and others are developing new, business friendly approaches to helping business meet the requirements of regulation; what they call "tick and comply" guidance.

Alongside all of this activity, my own Department has a particularly important role to play. I want the DTI to be in the forefront of the Government?s new approach to regulation.

I?ve now held two Red Tape Summits with leading business representatives to discuss how we improve our approach in this vital area.

But we need to do more than talk. I want to start the process today of acting on the views expressed at those meetings and on the representations received from individual businesses.

As a result, I can announce that my Department will be applying the following key principles to our work from now on:

First, we will have a presumption against regulation. Regulation will only be introduced where absolutely necessary and where all other avenues have been pursued.

Second, where regulation is necessary, we will ensure that it is as simple and user-friendly as possible.

Third, we will "think small first", ensuring that from the outset regulations and - just as importantly - the associated guidance are developed with the needs of small business to the fore. The new Small Business Service will have a key role to play here.

Finally, we will work with enforcement agencies to ensure that our enforcement is business-friendly and supports business efforts to improve productivity and performance. This is, afterall, the long term goal of my Department.

I am also very much aware of the burden of existing regulations.

That?s why I have already asked my Department to carry out a systematic review of the regulations for which I have responsibility.

Some are clearly in urgent need of attention. For example, the existing regulations on Employment Agencies were hopelessly out of date and overly complex. That is why we have just launched a consultation on how we can simplify and improve regulation in this sector.

And for those regulations that remain, I have asked officials to look at whether there is more we can do to help businesses.

Working Time Directive

If we are to achieve anything, we have to be ready to admit that we could have done things better in the past.

In particular, we have been listening carefully to what business has to say about the complexities of the new Working Time Regulations.

We will be publishing revised and improved guidance on the Regulations in the next few weeks. We will be ensuring that the revised guidance is in plain English.

The new guidance will clarify that for the vast majority of British businesses their existing documentation and systems already meet the Working Time record-keeping requirements. I want to emphasise this point. The vast majority of businesses will already be doing enough.

The guidance will also clarify that the vast majority of individuals do not need to keep a specific record of the hours they work.

Where workers have agreed hours set in their contract - as is normally the case - then copies of these contracts should be sufficient. If staff are paid overtime for further hours worked, the payroll should provide sufficient information.

The limits do not apply to directors and executives and other so-called "autonomous workers". Under the revised guidance, it will be clear that more people can benefit from this exemption and do not need to keep records of the hours that they work.

This new guidance will clarify some of the other grey areas in the Regulations and answer the questions that have been most frequently asked of my Department since they came into force.

It will include sample "opt-out" forms, a sample health assessment questionnaire for night-workers, plus additional guidance on who is covered by the Regulations and what is meant by working time. For example, a lot of people have asked about in-work rest breaks. The guidance will clarify that such rest-breaks are not working time and that records of in-work rest-breaks do not need to be kept.

I want to examine another area that I see as placing an undue burden on business.

As you will be aware, all businesses with a turnover of more that 350,000 are currently legally required not just to produce their final accounts but also to have their annual accounts independently audited.

I intend to consult on lifting the audit threshold from 350,000 to a higher level, possibly to the maximum allowed under the EU Company Law directives of 4.2 million. An increase would reduce overheads in many firms.

I am conscious that the Company Law Review is looking more fundamentally at the whole issue of audit, and of course, it is not long since we last raised the threshold. But I believe this specific question of thresholds is something we should look at again.

Any change would potentially benefit thousands of companies. For example, raising the threshold to 2 million would potentially lift the audit requirement from an additional 150,000 businesses. The Federation of Small Business estimates that a company with a turnover of 1 million will save 5,000 a year.

Involving the business community

As I hope you will realise by now, I place great importance on the two Red Tape summits that I have held so far. I am always open to suggestions from the business community, since it is business that has to deal with these regulations day to day.

To help in this task, I am very keen to have business?s direct input. That?s why today, I want to ask business to provide secondees to my Department to help in our drive to cut red-tape. I am particularly keen to involve those from small business, so the use of secondees can be on a part-time basis to meet the needs of small business.

And looking to the future, I want to look at all options for improving the quality of regulation where it is necessary.

For example, I shall be looking at the possibility of sunsetting some future regulations. I think the idea of regulations with an expiry date is an attractive one. In some areas, particularly in rapidly changing industries, there may be a case for sunset clauses in new regulations. This would mean that a regulation would only be in place for a fixed term and would then automatically lapse if not renewed.

Conclusion

Today?s announcements are not a one-off. As I said at the outset, there will be more measures to follow over the coming weeks.

We are clear that there will be a place for regulation to achieve certain goals. As I said before, when used sensibly and sensitively regulation can work for business as well as those who would otherwise be directly put at risk, but I see regulation as a last resort.

In today?s competitive markets we can ill-afford to burden UK businesses, particularly the UK?s vital small businesses, with unnecessary red-tape or disproportionate requirements.

Instead, we must focus on giving business the freedom, the incentives and the support they need to survive and prosper and to become the engines of growth for the British economy that we all want them to be.

That?s my aim - and the aim of my Department and the Government. I know that it is an objective that you share. In the months and years ahead, I look forward to working with you to achieve our common goals.


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