Better Regulation — House of Lords, 2017-12-07
Topic: Macroeconomics
Jonathan Mendelsohn (Labour, Centre-left): My Lords, I will make a declaration of interest. I am indeed meant to be a beneficiary of successful deregulation over the last few years, when we have had successive figures about how much has been deregulated to the benefit of businesses. I calculate that on that basis, I should be some £200,000 better off. I am not, but I am meant to be a beneficiary of successful deregulation. I have experience of regulation because I am now a PEP and treated as one with every bank account I have to deal with. However, I benefit from regulation, because I am regulated in one of my businesses by the FCA. While people may whinge about it, it provides an important architecture for businesses and our business benefits from it I congratulate the noble Baroness, Lady Neville-Rolfe, who has been a great champion of these issues and has a tremendous track record. I agree with much of what she said, and her prescriptions are similar to the things I will say; in fact, I may have been influenced by her in the first place. However, I disagree with her on one point. She argued that productivity is being held back by a surfeit of poorly enforced regulation and other forms of regulation. I do not believe this to be the case. The noble Lord, Lord Stoneham, made the point in his excellent speech that the OECD classifies us as one of the low-regulation countries and that low regulation is frequently cited as one of the reasons why we have high levels of foreign direct investment—whatever the arguments about that are. There is no evidence that there is an impairment of productivity caused by regulation. In fact, the opposite is more readily identifiable from the evidence. More regulated countries, including the US and other parts of Europe, are able to exercise greater levels of productivity by sometimes better use of management, skill and innovation and use of capital features. So that is not an argument. Some of this is not about the economic issues, although they are important It is worth acknowledging that we have had some excellent contributions. We miss certain voices, which have been prominent in this debate, such as that of the noble Earl, Lord Lindsay, but some interesting points have also been made about different industries. The noble Baroness, Lady Deech, talked about legal services. I suspect that the rise in trust in the law may well be as a result of the regulator she complains about. However, it is certainly encouraging that the level of trust in such an important sector as legal services is increasing My noble friend Lady Donaghy made an interesting speech about the construction industry, and my noble friend Lady Henig made an important contribution about one of the most successful models of regulation in this country: the security industry. I have direct experience of a company which, when the regulations came in, did not believe that they would be taken seriously, and went to the wall as a result. That was a jolly good thing. The SIA has done a wonderful job. I regret that the Government have not been more forthcoming on points which are clear about how that industry has developed a regulatory structure of great strength as a result. I know of many cases that support that. There are stories about companies, even brand names such as Kroll, and some of its alleged conduct. Especially in this modern digital world, it should come under a proper form of regulation The economic case for ensuring that we get regulation right is not as strong as the other case based on safety risk and other sorts of market failures. That is not to say that it is not important, but when the Federation of Small Businesses tells us that 20% of small businesses said that regulation was one of their top issues, that means that 80% said that it was not. We understand the relative importance of this. When businesses say that tax administration rates and other sorts of issues are more important, it indicates the level of priority The fact that we can do something is a case for doing it, but we need to put the importance of regulation in its context. Where it is most required is to deal with issues such as defining standards, competitive dynamics, failures, risk, imbalances, and those sorts of things—many of which my noble friend Lord Whitty talked about. We have to consider that regulation has to have a clear purpose and be easy to understand; there should be much more obligation on regulators to make sure that their regulations are understood We have touched on some key issues. The architecture of how we make sure we get good regulation is really important. I share the deep concern of others who wonder how the Government’s interpretation of how they should respond to the Public Accounts Committee’s exhortation to improve and streamline regulation, or even their understanding of their own manifesto to get better regulation, can in any way be helped by undermining the useful architecture that is evolving in our country. The idea that the Regulatory Policy Committee should change in the way that the Government suggest, whether over the de minimis issue, giving government departments the authority to be able to define, however they wish, to establish the level of impacts or the assessments, or the controversial requirements such as the first-stage consultations, are problems, and I urge the Government to think again about how they look at the Regulatory Policy Committee. There is consensus on that. I agree with the noble Lord, Lord Curry, that it is time to strengthen, not weaken, the structures we have, and the noble Baroness, Lady Altmann, also made an excellent case. We need not just to ensure that we do not give departments absolute and unfettered ability to define this process but we should look at putting it on a more independent and possibly statutory footing. The definitive case was made unbelievably well by my noble friend Lady Andrews, and I urge the Minister to prioritise her questions when he answers. My noble friend Lord Haskel properly identified the statutory instruments, which are becoming an ever increasing problem in this House; they are being used in particular for departmental convenience and not for the public interest What is to be done? Of course, we have to beef up the independent structures, as endorsed by the National Audit Office, and we need to include EU tax administration, the national living wage and the national minimum wage. We have to be truthful about the impacts. It is essential that we get a handle on what is happening, particularly as we go through Brexit. It is crucial to think small first and be easily understood, along the lines of what the noble Baroness, Lady Neville-Rolfe, said. It is also utterly crucial that we enforce the regulations that we have. I declare my interest as a landlord. The number of landlords who are prosecuted as against the number of complaints that are made shows that we probably do not enforce the regulations properly. The Residential Landlords Association found in 2016-17 that only 496 landlords were prosecuted but there were 105,359 complaints. I would be interested in knowing how we can process these complaints effectively I turn to the subject of the national minimum wage and the categories of workers. Each year 70,000 internships are unpaid, all breaching the national minimum wage rules, yet alongside the entirety of the issues surrounding the national minimum wage, there have been only 13 prosecutions. I worry about this because Grenfell raises a number of particularly tragic issues. As a result of Grenfell, we decided to look at fire safety in relation to the short-term renting of private homes, such as those offered through Airbnb. It seems that the Government believed that the fire safety order of 2005 covered this. The problem was that none of the agencies—the Government, the local authorities, the fire brigade or the fire safety authorities—thought that they had responsibility for it, so no one was doing anything. Counsel to the Health and Safety Executive then provided us with an opinion saying that the safety order—the law that the Government think applies—does not apply. There is a regulatory break, so there is no regulation whatever. This is a major issue and I would like the Government to clarify the position. There is also the major question of who enforces the enforcers. We have a big problem with the gap there and I would like to see the Government try to address it Questions were raised about the European Union. We have to get some understanding of how the changes will affect us. There is a variety of EU regulations and I would be interested in knowing which UK bodies will assume the investigatory role of the European Commission. What work have the Government done on that? How many bodies do they estimate will need to transition Finally—I make this point now, as I do in all my contributions—I would be very grateful if the Minister could give one clear answer or proper guidance on how we should measure the Government’s achievements on better regulation. It is very important that this is not just about exhortation; anything that we can use to test what better regulation means would be very welcome.