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O'Brien: The DTI is living on a different planet

Speech in the House of Commons Trade & Industry Budget Debate

"I welcome this opportunity to assess the real implications of this 'vote now, pay later' Labour Budget on Britain's wealth creators, risk takers and entrepreneurs.

Beginning with the broad economic background to this Budget debate, I am conscious of the tradition for these occasions - at least under this Chancellor - to include grand historical analyses of the state of the economy. I am more than happy to oblige with this custom.

This Government and the present Chancellor claim credit for 50 consecutive quarters of growth - so when did that start, Mr Speaker? Of course, for the vast majority of businesses and people of this country not brainwashed by the spin to which Labour is addicted, it started in the final quarter of 1992. So the solid foundation on which the UK's macroeconomic stability was built, and on which British business so vitally depends, was in fact established during the last four and a half years of the previous Conservative Government.

So what have Labour done whilst building on our golden legacy? The Chancellor and in domestic matters his sidekicks the Prime Minister and a string of Trade and Industry Secretaries have presided over the largest trade deficit since records began in the reign of William and Mary; and the lowest economic growth of any major English-speaking economy over the last seven years. With the exception of 2001, more regulations were introduced by this Government in 2004 than in any other year in the last half-century.

So much for Prudence Brown and her sister Constant Spin. But what is the DTI's role in all of this? According to her Department's recent Business Plan, the DTI's principal policy goal is to 'raise the rate of productivity growth' and 'improve (the) competitiveness' of the UK.

Tragically, for a whole 8 years under the heavy trudge of Labour, the Department's over-riding policy objective has had a staggeringly miserable record. Productivity growth is down by a third in comparison with the last Conservative Government, and the UK's competitiveness under Labour has fallen from 4th to 11th according to the renowned World Economic Forum.

Why has the DTI failed British business so miserably? As Hon Members might expect, I have been giving this matter not a little thought. The inescapable conclusion is that the DTI is living on a different planet to the rest of us. Planet Hewitt.

On Planet Hewitt, there is no correlation between the level of taxation and regulation on business and the productivity growth and competitiveness of the UK. On Planet Hewitt, the level of taxation on business has absolutely nothing to do with the Secretary of State whose Department exists to, and I quote, 'champion UK business at home and abroad'.

We know this because on 1 February this year, I tabled a Parliamentary Question to ask the Secretary of State 'what assessment she has made of the likely effects of additional tax rises on businesses in the UK in the period 2005-07 on national private sector employment growth, productivity growth and competitiveness.'

This is, after all, a highly pertinent question, given that Table C9 on p.254 of the Red Book reveals that the Chancellor is expecting his receipts from tax and national insurance to rise from 36.3% of GDP for this year to 38.5% for 2008-9. The Ernst and Young Item Club, which uses the Treasury's model of the economy, calculate that the Chancellor will need to raise taxes by £10 billion to achieve this. Furthermore, the PricewaterhouseCoopers poll reported yesterday found 73% of the senior business people questioned believe the tax burden will rise significantly in the next three years under Labour - but we have shown how the inevitable tax rises that would follow hard on the heels of, electors forbid, a Labour third term can and will be avoided under an incoming Conservative Government.

So I waited for a response to my Question. And I waited. And again I wondered what exactly the Secretary of State does with her time. Eventually, on 10 March - five weeks later - I received a response from the Secretary of State saying the question was being transferred to the Chancellor.

It is partly because all discussion - let alone all decision-making - about the effects of business taxation has been transferred to the Chancellor that taxes have gone up 66 times since 1997, and at the same time our productivity growth rate, our private sector growth rate and our competitiveness continue to fall under Labour.

When the CBI's Sir Digby Jones said:

'Business has become mightily fed up with being taken for granted. The cumulative rise in taxes of £47 billion between 1997 and 2005 has exacerbated a five-year decline in corporate profitability and sliced investment by 11.5% in just two years.'

The CBI Director-General is referring to a fundamental structural failing of this Government. Faced with a complacent Chancellor with an obsessive-compulsive tendency for micro-managing the private sector, there is no one to stand up for the interests of British business at the top of Government. The losers are not just the powerless Prime Minister and his hapless Trade and Industry Secretary - but much more importantly, the wealth-creators and risk-takers on whose profits we all ultimately depend for our essential public services. And let's not tip toe around the subject - profit is good, as well as essential to the standing and welfare of our nation and her peoples.

Mr Speaker, not for the first time we've heard the Secretary of State's torrents of words about family friendly policies, the importance of diversity and the position of women in the workplace. We have to make it absolutely clear there is no dispute between us about the importance of harnessing all the resources and talents in our society.

Of course, the best deliverer is not words uttered on Planet Hewitt but the best practice of companies of all shapes and sizes, up and down the country. The most important opportunity for all is to enable all British businesses to be more and more competitive. Any more Government-inspired burdens on business only take this country backwards not forwards under Labour.

But if the Secretary of State really means what she says, she should put her own house in order. As the work/life balance is so important, why do a majority of staff at her Department - 55% - say they work 'in excess of their conditioned hours', according to the DTI employee survey in 2003?

As diversity is so important to the Secretary of State, why do a significant majority of DTI officials in the same survey - 60% - not agree with the statement: 'I believe that DTI recognises the diversity of its customers and adapts its policies to reach them'?

And if the Secretary of State says she believes so strongly in narrowing the gender pay gap (which I certainly do), why is there still a 16% difference between male and female salaries for the DTI - only marginally different from the national average?

But let us return to the outer orbit of Planet Hewitt. As well as tax, the other major bugbear of business is over-regulation, which deflates corporate profits, absorbs valuable management time and drains entrepreneurial ambition. But on Planet Hewitt, British business is not over-regulated, only "better regulated".

The Secretary of State and her Ministers have been absolutely adamant on this point. The Secretary of State said in November 2003:

'the number of regulations each year that impose a cost on business has fallen since 1996'.

Back in the UK, the incredulity greeting that claim was accompanied by sharp intakes of breath. According to a CBI survey, an overwhelming 95% of business say they are having to spend more time on red tape than was the case five years ago. Even the Chancellor's Hampton Review, published last week found:

'The predominant mood, particularly among small businesses, was one of concern of… the cumulative burden of regulation. Many surveys and much academic research confirm that this is the general consensus. This issue has been more prominent in recent years…'

The Secretary of State's Big Conservation on business regulation cannot have extended beyond her own Front Bench because she is mysteriously absent from the 'general consensus' referred to by Philip Hampton.

According to the British Chambers of Commerce (BCC), Labour has placed a 'millstone' of just under £40 billion of regulation around business' neck since 1998. On Planet Hewitt, the BCC figure is of course wearily disputed. Her Small Business Minister told this House in June last year:

'I reject the figure of £30 billion (the BCC estimate of the cost of business regulation introduced between 1998 and 2003)… the real cost of administering the regulations is only a fraction of that'

Last week, however, the Government's own Better Regulation Task Force admitted in a report:

'Complying with the information requirements of UK regulations is estimated to cost some £20-40 billion per annum'

So according to the BRTF, whose report the Chancellor has told us he accepts in full, the cumulative burden of business regulation introduced under this Government is anywhere between £140 and £280 billion - by their own admission. That is, at the very least, three and a half times greater than the amount estimated by the BCC, whose figures DTI Ministers from their distant planet vehemently 'reject'.

The big tent of consensus, from which the Secretary of State and her Ministers are mysteriously absent, does not just extend to the cost of over-regulation, but also to the policy tools to lighten the burden on business.

Back in the real world on Earth, the Conservatives have been listening to individual business men and women, to business organisations and of course to our own Panel of senior business practitioners and economists. Based on their input and advice, we have published a series of reports to reverse the flow of over-regulation. Our reports, which are accessible via www.conservatives.com/policies, have been welcome by all the major employer bodies, including the CBI, FSB, FPB, IoD, EEF and the BCC.

And after listening to the concerns of British business about the stock of existing regulation, we have also announced plans to introduce a Deregulation Bill containing specific measures to reduce the volume of regulation introduced by this Government. We will include the Bill in the first Queen's Speech of an incoming Conservative Government.

However, when the Conservatives, on the advice of our Business Deregulation Panel, called for sunset clauses, the Small Business Minister dismissed them as the 'quack cure for regulation'.

When the Conservatives backed Post-Implementation Reviews, the Industry Minister derided them as 'regulatory impacts on regulatory impact assessments' that would 'neither cut bureaucracy, nor deregulate'.

When the Conservatives published proposals for regulatory budgeting along the Dutch model, it was the Treasury this time who claimed such budgets:

'could easily be used up by the need to implement EU rules. This would leave no space in the Budget for legislation proposed by British politicians'.

And when the Conservatives announced plans to end the 'gold plating' of EU legislation when transposed into UK law, once again the Small Business Minister accused us of being advocates of what he called 'copping out of directives'.

Now, all of a sudden, and with a General Election imminent, the Chancellor feigns to announce that he has had a Damascene conversion to Dutch-style regulatory budgeting and that he will - by no means for the first time - over-rule his DTI subordinates by accepting the BRTF's recommendations on sunset clauses, Post-Implementation Reviews and ending 'gold plating'. The Chancellor and the BRTF have obviously been absorbed studying our Action Plan to reverse the drivers of regulation - the Chancellor's speech had phrases in it which were extraordinarily familiar to me and my Business Deregulation Panel - I wonder where he lifted them from?

It is symptomatic of the DTI's extraordinary ineptitude under this Secretary of State that British business finds itself having to defer to a famously meddling and interventionist Chancellor to defend them from extra red tape and bureaucracy. Mr Speaker, they're all talk.

After all, this is a Chancellor who describes the creation of the Financial Services Authority, a super-regulator whose handbook runs to over 8,000 pages, as a 'measure to reduce the administrative burden of regulation'. And this is a Chancellor who proudly if rather strangely refers to the new dispute resolution regulations as a 'deregulatory measure'. These regulations that are so complicated that the DTI had to spend £200,000 pulping and then rewriting its guide to them, and the Federation of Small Businesses has described them as a 'potential minefield for small firms'.

These regulations tell British business all they need to know about the difference between Labour and the Conservatives on red tape. Labour-speak is that introducing the new regulations is somehow 'deregulatory'. Sometimes Labour get their newspaper headline - but it is long suffering British business that gets the hassle of a costly and complex new set of Labour impositions.

The Conservatives, by contrast, will take action to abolish the regulations via our Deregulation Bill.

So on his record so far, British business has no more reason to trust the control freakery of the Chancellor in the Treasury than the nannying of the DTI to deliver genuine deregulation and to get Government out of British business' way. The Chancellor should beware that no one is better able than British business to see through his pre-election 'Bribes of March'.

Mr Speaker, as we have heard this morning, on Planet Hewitt they do not spend much time worrying about the over-taxation or the over-regulation of business, but they do spend a lot of time worrying about fictional Conservative policies which bear no relation to the reality of our own proposals.

The New Labour spin machine was whirring at full throttle this morning as we heard about the imaginary Conservative plans to decimate government support for science and research and development.

Back in the real world, I have made it quite clear that a Conservative government will at least match the current administration's spending on science, innovation and R&D. And we will refocus the raft of ineffective government funded support schemes, which we know from the FSB's 2004 membership survey only 17% of businesses, particularly small and medium sized businesses, actually access - a depressing finding also borne out by the Forum of Private Business' figures. And of those few who have found these schemes, only 1 out of 10 businesses in the FSB survey found the DTI's advice or support satisfactory.

So, refocusing these schemes is the correct and sensible approach we will take. After all, 'a few major wins of significant impact for business are worth any amount of initiative-itis.' Those are not my words, but those of the Martin Wyn Griffith, Chief Executive of the Small Business Service.

We will therefore retain and enhance the Manufacturing Advisory Service, the Small Firms Loan Guarantee Scheme and Enterprise Insight. And whilst we will abolish the Small Business Service as a freestanding entity and save administration overhead costs, we will absorb its value-added activities back into core DTI with a real outward customer focus.

The Secretary of State has said the SBS itself is indispensable - it's not, it's the business support services delivered to customers, not advice to Ministers that counts in a competitive world.

And if I can bring the Secretary of State and her Ministers once again crashing back down to Earth, the Chief Executive of the SBS himself has already stated in clear terms that the SBS will discontinue its provision of direct support to businesses and downsize its operations 'by 60 per cent by April 2006.'

Mr Speaker, I commend to the House and all the people engaged in business and the workplace in the UK our line by line analysis of DTI activities. We believe that taxpayers have an unqualified right to expect value for money from a Government. They know they are not getting that today under Labour, and that they can only get it from an organised and efficient Department of State, which is what we have set out in detail for a Department for Business under the Conservatives. We note that according to a DTI staff survey only 19% of DTI employees believe 'there is a shared sense of purpose and direction across DTI' today and fewer than half believe 'DTI's work is focused on a clear set of priorities'. That is a startling indictment of the current structure and regime of the DTI itself under this Secretary of State.

The Secretary of State should listen to her colleague the Secretary of State for Culture, Media and Sport, who told the House earlier this month that the BBC's model of governance is 'unsustainable' because the Governors cannot be effective as both 'cheerleader' and 'regulator' of the BBC. No business, no organisation has ever succeeded where its strategy is to pull in two polar opposite directions as today's DTI does.

By the same token, in the real world the DTI cannot more than double its employment relations budget and introduce 17 major new pieces of employment regulation, showing just how much it really distrusts business, and at the same time claim to be an effective cheerleader for business. That is why a Conservative government will restructure the DTI to champion not regulate business.

Championing business means first and foremost showing a willingness to listen to them and celebrating all those engaged in businesses in Britain. The Conservatives have already shown our willingness to listen to and engage with business not just on deregulation but also in developing our recent skills policy. Working with the CBI, the BCC and the EEF, we have proposed a system of Vocational Grants to create a skills strategy driven by what British businesses demand, not what the education bureaucracy happens to produce.

Mr Speaker, smears about Conservative policies and fantasy Labour initiatives to deregulate, after eight years of relentless regulation, for which the Secretary of State remains stubbornly unapologetic, are not good enough. British business will consider this Budget by the real life facts on the ground, and not the Labour myth-peddling machine.

It is a fact that before the last Election, Labour said they wouldn't put NICs up, and immediately after the Election they did.

It is a fact that, according to the CBI, 'budget changes have pushed up business taxes by a cumulative £40 billion since 1997'.

It is a fact that there have been 15 new regulations every working day under Labour, up 50% on the last Conservative Government.

It is a fact that under Labour - as it says on p.62 of the Red Book - 'the UK has not been fully effective at realising the commercial potential of research'.

It is a fact that for every job the private sector lost last year, the public sector took on almost two jobs.

And it is a fact that almost a million manufacturing jobs have been lost under Labour.

Enough is enough. Instead of Labour's endless talk about the challenges facing British business, businesses need a Conservative Government with a clear plan of action for:

• a low tax and a real low regulation economy

• the right skills system, driven by the demands of business, to pull young people up through school and higher education and further education

• supporting science and R&D by stripping away much of the current bureaucracy; and

• a refocused DTI to be that loud and authoritative voice for the confidence, competitiveness, profitability and the highest reputation of British business at the heart of a Conservative Government, whose success will transparently be measured by its month by month, year on year real effectiveness in bringing down the regulatory burdens on business.

None of this is rocket science. It is all deliverable - but only with the Conservatives. It is clearly out of reach of the inhabitants of Planet Hewitt."

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