My Lords, it is with great pleasure that I speak on the Enterprise Bill, a subject close to my heart as well. Certainly, with the deficit down by half and projected to reach surplus by the end of the Parliament, the fastest-growing economy in western Europe and the best destination for foreign direct investment outside the US, we all have a lot to be proud of. The party opposite says, in effect, that that is enough now and that it is time to turn the page on boosting our competiveness, time to stop encouraging investment and time to put up taxes on families and businesses.
This Bill is to be welcomed since it does the opposite. It puts the pedal back to the metal and asks: what next to boost enterprise in the UK? No complacency, no sticking with what we have and definitely no reversal of what we have achieved. It contains many measures but I will focus on just a few of those that will help small businesses in particular. After all, there are some 5.2 million small businesses in the UK—more than in France, and more than in Germany.
The very welcome sight of the noble Duke, the Duke of Wellington, being introduced to the House today reminded me that someone once called us a nation of shopkeepers. Today, we are a nation of fast-growing businesses, businessmen and entrepreneurs. I accept, of course, that regulation is necessary to protect consumers, employees and the environment. As the Bill shows, it can be necessary to protect small businesses from large ones. However, we must make sure that it is proportionate and necessary. Specifically, we must make sure that it does not damage growth, employment and competitiveness—the engines of job creation.
In a recent survey, which pretty much every Peer seems to have quoted, 73% of scale-ups said that they would be able to grow faster if dealing with regulators was easier. It is amazing what Google can do. This means that regulators have to keep in mind the economic impact that they could be having on their stakeholders, especially small businesses. The Small Business, Enterprise and Employment Act, passed earlier this year, requires the publication of the business impact target, as we have heard. This sets out the economic impact of new legislation on business. However, it covers only regulation and legislation undertaken by Ministers. To increase transparency, the intention is to extend the scope of the target to include the regulatory activity of all statutory regulators—which, as my noble friend Lord Cope of Berkeley revealed to us, is some 70 organisations—not just in so far as they exercise powers on behalf of Ministers and departments, but in so far as they exercise their own statutory powers. The Minister will, when empowered in due course, specify the relevant statutory powers in secondary legislation.
It is to the last point that I will speak, focusing on the financial services in which, of course, I declare an interest as I earn a living from that industry. When drawing up this secondary legislation, it is essential that in respect of financial services, as well as regulatory organisations such as the FCA, the Financial Ombudsman Service—FOS—whose board is appointed by the FCA,
is also included and made to report on business impact. There are, of course, seven other ombudsmen whose work I know less, although I have seen a little of the Pensions Ombudsman, and I think that my comments would apply to all the ombudsmen who operate under regulatory authorities, although, as I say, my focus has been interaction with FOS, the financial ombudsman.
Let me be clear that consumers, particularly in financial services, need proper protection. However, the situation we have now can be hugely damaging for firms being investigated by FOS or the FCA. FOS, which many people regard as a somewhat opaque organisation, can make rulings in an opaque manner itself, with no resource or recourse available to businesses so impacted. Extraordinarily, it seems that there is no right of appeal, even where decisions have a materially damaging effect on their own businesses. It must be the case then that FOS at least should be made to account for the impact of its decisions in the same way as other regulators.
I will cite just one recent example: that of retrospective regulation, which is, of course, hugely damaging for firms since it creates a climate of uncertainty where a firm never quite knows if it has fulfilled its compliance responsibilities. In a recent review, the FCA rejected all feedback it received, pointing to areas where regulation is being applied in this way. However, I looked at the example of SIPP operators, and there we have a case in point. The FCA has previously acknowledged, quite rightly, that SIPP operators are not responsible for the advice given to SIPP members by advisers. However, a recent decision by FOS has upheld a case suggesting that SIPP operators are responsible for investments that were made and have now gone bad. Clearly, this is palpable nonsense. It has highlighted how difficult it is for bona fide businesses to appeal against FOS’s decisions and threatens to cause huge disruption to an important sector of the financial services industry—the point being that FOS and similar organisations can make decisions that are very damaging to business without having any obligation to report on the growth and business impact.
As far as financial services are concerned, I therefore urge the Minister to ensure that the FCA is included within the regulators’ code so that when it holds its thematic reviews, as it calls them, it has regard to growth and economic impact, not just consumer protection, and has perhaps to consider which other organisations should be covered. Perhaps more importantly, I urge the Minister to consider including the ombudsmen services in the regulatory code. It seems strange, given their enormous powers, that they—and in particular FOS—are excluded from the list. Dare I say it, further steps need to be considered to ensure their transparency and accountability.
Next, I will mention the Bill’s approach to business rates. We have heard a lot about rates recently. The Bill contains important measures that mandate the sharing of business rates data across local governments and authorities, so that business does not have to share the same information twice. This is extremely helpful, but perhaps the most significant point is on appeals. A 2014 consultation identified that too many rating appeals are made without evidence, under a process that lacks
transparency and takes too long. The very helpful Administration of Business Rates in England: Interim Findings makes the point that more than 70% of all challenges on the 2010 rating list resulted in no change.
How did we get here? I can do no more than share my experiences with noble Lords and declare an interest, in that I, too, sadly, pay business rates. When I started my business some 27 or 28 years ago, a man from the council came round to see me in the office and told me that he wanted to look around to determine the rateable value. I had no idea how the system worked and at the time had other worries on my mind, as most new entrepreneurs do. I asked him what would be the value and subsequent rate applied to me. “Well”, he replied, “I’ll give you a number, but it won’t really be relevant or matter as you will appeal against it and then we’ll find a number that works”. I was surprised to find that he was right. I had to take, and pay for, expensive professional advice. The thought occurred to me all those years ago that there must be a better way.
As luck would have it, this was in 1989. As my noble friend the Minister will recall, the previous Conservative Government had established a deregulation unit reporting to the DTI and the Cabinet Office, headed by an ambitious young adviser called Francis Maude—now my noble friend Lord Maude—with a keen and very bright civil servant advising him. I served on the tax division of the task force and seized my moment to look at business rates. I raised a number of issues at the time, not least that the Valuation Office required a business to resubmit the same information on every return, as opposed to keeping the information and simply asking whether it was still correct. Somewhat horrifyingly, I learned that the Valuation Office is still not digitised and still requires nearly all of its information to be submitted on paper. Sadly, in 1997 the Labour Party closed down the deregulation unit and my recommendations never progressed. That happened almost immediately, so once again it is up to the Conservatives to try to make life easier for businesses and entrepreneurs, as opposed to making life easier for civil servants.
The Bill provides for a revised system that is clear, sets out how long it should take and any and all action required. We should be clear that this process needs to be updated, because it is clearly not fit for purpose. However, I stop short of mandating annual reviews, which have been discussed. Yes, they would reduce the incentive to appeal, but they would cause annual chaos and be hugely expensive, costly and inconvenient for everyone—except, of course, chartered surveyors. Improving the current system to bring parties together earlier and with more transparency is a sensible step forward.
Other noble Lords have spoken about different but important measures in the Bill, such as apprentices, the Small Business Commissioner and public sector exit pay caps. All together, they add up to an attractive package of measures that would allow us to bolster our competitiveness further instead of standing still. Unsurprisingly, then, the Bill has been endorsed unanimously, as far as I can tell, by all the business groups.
The party opposite may say that we do too much for businesses and not enough for consumers and workers. That is because they may not have understood that to be on the side of business is to be on the side of workers. Entrepreneurs create jobs and businesses nurture employees. We do not set one against the other. This is one nation: we back investors, businesses and workers. The cause of all three is advanced by the Bill.
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