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O'Brien: Action to set British business free

Speech to Conservative Party Conference 2004

Business let down by Labour

Until just over 5 years ago, when I was first elected to Parliament, on the Conservative Party's victory in the Eddisbury by-election I had had well over a decade's experience as a FTSE 100 manufacturing industrialist and small business operator. My experience, the same shared experience for business people up and down the country, is how fed up and disillusioned business men and women have been down the years with politicians making promises, when I and they know well the crushing and dispiriting reality of red tape as you spend more and more of your week trapped behind your desk, complying with regulations rather than getting out and winning new business for Britain.

I know what it's like to work at the 'sharp end', here and abroad, and I know from experience where markets succeed and how regulations fail.

I have seen at first hand how over-regulation slows down business responsiveness, diverts resources away from productive investments, hampers entry into new markets and reduces innovation.

Thanks to the deregulatory reforms started under the Conservative Governments of Margaret Thatcher and John Major, progress on deregulation was at last being made. And it is because of those reforms that we are now out-performing our 'inward-looking, inflexible and sclerotic' continental neighbours (to borrow none other than Gordon Brown's very own words).

This is of course positive news for British business. But what really concerns British business, and with good reason I am sorry to say, is the outlook in the years to come.

Business has been let down by Labour enough.

During the last 7 years, the Labour Government has raised taxes 66 times.

They have raided our pensions funds by £5 billion a year.

They have placed what the Director-General of the British Chambers of Commerce has described as a £30 billion "millstone" of regulation around business' neck - some necklace, some neck!

They have presided over the loss of 865,000 jobs in the UK's manufacturing sector, the halving of our savings ratio, the largest trade deficit since the reign of William and Mary, and the lowest economic growth in the English-speaking world.

If there were a Labour third term, they would put up taxes again. They would try to hoodwink the British people into signing a European constitution that won't just put Britain at the heart of the same 'inward-looking, inflexible and sclerotic' European Union, but put European bureaucrats at the heart of Britain.

That is not the recipe for Britain's sustained growth in the global economy of the 21st century.

Even the government seems to admit this view. According to the Treasury, 'productivity growth underpins strong economic performance and sustained increases in living standards' .

But productivity growth in the UK has collapsed by a third since Labour came to power.

And the UK's competitiveness ranking has fallen by a whole 11 places since 1997 alone, from 4th place when they took office to 15th place in 2003.

No amount of Labour spin can hide these facts.

I listened in sheer disbelief to Patricia Hewitt's speech at the Labour Party Conference last week. "I'm not a nanny", she told us. Even her spin doctors must have been reeling from that one liner.

According to the Federation of Small Businesses, Labour has introduced 17 major pieces of new employment legislation since 1997. We know that hard working men and women running small businesses are now forced to spend 200% more time dealing with red tape as a result - up to ten hours every week.

But the full costs of those new laws and regulations are unquantifiable. There is no way fully to measure the innovation or investment that does not happen, the profits that are not made, the new jobs that are not created - let alone the long term economic benefits of all of these were they to have taken place.

It is the rapid erosion of the very flexibility that the Conservatives fought so hard for and secured for this country and which gives Britain our present (albeit declining) competitive advantage that causes me the most concern as Shadow Secretary of State for Industry.

My worry is that Gordon Brown and Patricia Hewitt have only the most theoretical understanding of the reality of the global economy and of competing with nations like China and India.

They know that wages are at less than £20 a week in those countries and they know together China and India produce four million graduates a year . They know because their officials include these facts in their briefing notes.

But they do not understand what competing with these countries really means in practice. How could they? When have they ever employed anyone, when have they ever taken a commercial risk or fought for a contract where their business and their second mortgage depends on it?

And because they do not really understand the reality of competitive markets, they do not really care about over-regulation. That explains why Labour has built such a bloated bureaucratic and regulatory machine that they have simply lost control of all the regulations they are churning out.

Indeed, Patricia Hewitt cannot tell you how much regulation costs us each year,

how many regulations are produced each year,

how many regulations are repealed each year,

or even how many regulators there are across Whitehall.

The situation is now so chaotic that Labour are now regulating even when they say they don't want to.

(As we have already heard today) take the EU Food Supplements Directive, for example. This Directive threatens to make illegal 'thousands of vitamins and food supplements' because they contain nutrients which are currently allowed in the UK and accepted as safe by the Food Standards Agency.

The Directive is so poor that the Health Food Manufacturers Association has successfully challenged it in the High Court in London.

Even Peter Hain has called it 'particularly bureaucratic and heavy-handed'.

So exactly why has the Government always supported this Directive, and why does it still support it today?

If they really think it is 'bureaucratic and heavy-handed', why didn't they just say 'no' to Brussels when the directive was being drafted?

Some people think you cannot just say 'no' to the EU. But the Conservatives can. How else did the last Conservative Government negotiate the opt-out from the Social Chapter - which Labour later threw away; or the opt-out from the Working Time Directive - which Labour are jeopardising now in order to pacify their paymaster unions in advance of a General Election?

Labour does not trust British business

Labour over-regulates not just because it does not understand business, but because it does not trust British business. Tony Blair made that clear as far back as 1996, when he said the Conservatives have 'far too much faith in the benign… nature of private-sector behaviour once deregulation has taken place'.

That attitude is an insult to the nation's vital wealth creators, to the very people who generate the profit that his Government spends in such a profligate and inefficient manner.

And if Labour does not trust business, why should business trust them?

This Government has does not deserve their trust. Take the use of 'sunset clauses' on business regulations.

The 2001 Labour Party Manifesto pledged to use sunset clauses.

But only a few months ago, the Small Business Minister described them as 'the quack cure for regulations'. Indeed, there is not a single example of a sunset clause being used amongst the 4,000 odd regulations introduced by Labour last year.

At the moment the only thing the sun seems to be setting on is Labour's pretence as a Party for business.

As for the Lib Dems, I will not say much about them because frankly they do not have much to say about business.

They 'flip flop' between the importance of cutting red tape and the importance of backing a 'right to strike' via the EU Constitution and hammering companies with a £100 million compliance burden to administer a so-called local income tax.

Conservatives propose a new relationship with British business

The Conservatives propose a new kind of relationship between government and business, based not just on support but on a fundamental trust in free market democracy and trust in the people who are prepared to take the risks and create the profit on which all of us depend.

It is precisely because I trust business that I am so passionate about deregulating it. As I and everyone in this country who has worked or are working in businesses in our country know we need no persuading of the moral case for deregulation. It is on the side of the entrepreneur who starts with nothing but a clever idea; it is on the side of the successful small business owner who has the ambition to expand and to take on more staff.

Of course it's easy to talk the talk on deregulation when you are in Opposition.

You might be suspicious of promises of 'bonfires of red tape'. Frankly, in the past you might have had reason to be.

But I have been doing my homework in Opposition. In April this year Oliver Letwin and I set up a Business Deregulation Panel of senior business people and economists. I asked them to work with the Conservative Policy Unit to produce a deliverable set of policies for the next Conservative Government to reduce the existing stock and future flow of business regulations.

That way, when Sir Humphrey shows the new Conservative Ministers their red boxes on day one of a Conservative Government, and tells them that if they read through them over the weekend they will understand their jobs, they will be able to show him our 'blue boxes' and tell him that if he reads through those he will understand his job.

We have already announced our proposals to stem the tide of EU regulation and eliminate 'gold plating'. They were warmly welcomed by all the major business groups and employers bodies, including the British Chambers of Commerce, the IoD, the Engineering Employers' Federation, the Federation of Small Businesses, the Forum of Private Business and the CBI.

Over the next few months, I will be announcing further deregulatory policies to tackle the 'blame and claim' culture that is proving so costly to business and to reverse the administrative and regulatory creep over which Labour and its addiction to fat Government have presided since 1997.

By contrast the Conservative Party in Government will be driven by the experience of its Leader, Michael Howard, who proved when he was Home Secretary that if a Minister is determined to lead then officials will follow - and that entire departmental cultures can be transformed if necessary.

Thanks to Michael, I'm pleased to say the business deregulation agenda has been given the very highest backing and support.

That has been confirmed by the appointment of John Redwood as Shadow Secretary of State for Deregulation, who will act as a 'supercharger' to all of our efforts, as he put it in his own inimitable way.

Conclusion

So in the run up to the General Election there will be no prawn cocktail offensive from the Conservative Party - there will be a policy offensive.

Chief amongst our commitments for action on a published timetable from day one of the incoming Conservative Government under Michael Howard:

We will use sunset clauses for new business regulations wherever we can.

We will eliminate the gold plating of EU laws.

We will raise the threshold for exempting small businesses from regulations - it works in the United States and it will work here.

We will abolish the discredited 'better regulation' initiative and substitute it with a genuine, deliverable and urgent deregulatory programme.

We will reverse the blame and claim culture that is costing British business £10 billion a year .

We will slim down central government and put its chief regulators on strict diets.

We will require all Officials with any responsibility for regulation to have been seconded to business for three to six months, so that when they return they make good poachers turned gamekeepers.

We will refocus the DTI as a leaner Department for Business, with officials dedicated to deregulating business and removing barriers to growth.

We will appoint at least 50 experienced business supermen and superwomen as business lead generators in key overseas markets to add real value to our exporting businesses

We will set British business free.

We will celebrate the achievements of all the people in this country who strive to win in business so that, once again, they can be proud of what they do for our country, their families, their communities and themselves.

The Conservatives are in the business of winning,

Winning for business, winning for Britain."

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