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Regulatory Impact Assessments

3. Mr. Christopher Chope (Christchurch): If she will meet the Small Business Service to discuss the recommendations of the National Audit Office report "Better Regulation: making good use of regulatory impact assessments"; and if she will make a statement. [16471]

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The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths): I am discussing the NAO report with the Small Business Service. I thank the hon. Gentleman for asking me to make good use of regulatory impact assessments. How about this: RIAs have identified that 94 per cent. of the costs on business result from two measures, the national minimum wage and the working time directive? The first is now supported by the hon. Gentleman's party; the second is one on which the Conservatives abstained in Brussels in 1993.

Mr. Chope: The Minister's typically complacent response to the serious recommendations of the NAO shows that the Government merely pay lip service to reducing the burden of regulation on small businesses, while that burden is increasing all the time. What will be done to ensure that the Small Business Service produces the report recommended by the NAO in recommendation 26.vii, and what action has the Department taken in response to the earlier recommendation of the better regulation taskforce that it become a champion of small retailers, who find that they are spending up to five full days every month dealing with Government administration?

Nigel Griffiths: The NAO put the record straight and commended us for using regulatory impact assessments to avoid £150 million in costs to business on one measure alone. Of course it is important that we do everything that we can to minimise red tape. That is why we have appointed a Minister with responsibility for regulatory reform in every Department, established a ministerial panel for regulatory accountability, and passed the Regulatory Reform Act 2001 to provide a fast track for reducing burdens and scrapping outdated legislation. The hon. Gentleman speaks with some authority on the matter. When he was a Minister in the six years after 1986, 18,434 regulations were passed.

Mr. Adrian Bailey (West Bromwich, West): Does my hon. Friend agree that small businesses are for ever complaining about the alleged burden of red tape? Can he update the House on the progress made by the deregulation unit in the Department of Trade and Industry?

Nigel Griffiths: Good progress has been made. Many small businesses do not have the resources—the legal and accountancy advice—-available to large businesses. That makes it necessary for every Government Department to think small first. It is important to remind the House, as my hon. Friend has done, that a great deal of valuable work has been carried out by Government. That is perhaps one reason why Arthur Andersen research shows the UK as the country that provides the most overall friendly entrepreneurial environment, fostering growth companies most effectively.

Mr. Philip Hammond (Runnymede and Weybridge): The Small Business Service was set up less than two years ago to champion the interests of small business in Government. The Minister confirmed this morning that he will discuss the report with the Small Business Service. Can he explain why his right hon. Friend the Secretary of State found it necessary to strip the Small Business Service of that role, leading directly to the resignation of

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its respected chief executive, Mr. David Irwin? Can he tell the House which crony of the Government his right hon. Friend intends to put in place of Mr. Irwin as the new small and medium-sized enterprise tsar?

Nigel Griffiths: The Opposition spokesperson is wrong on both counts. The role of the Small Business Service has been strengthened, and Mr. David Irwin, who has shown excellent leadership and ensured that the Small Business Service is helping thousands of businesses through Business Links and other Government measures, has informed me that he is serving out his full contract. There is no question of him resigning.

Ms Debra Shipley (Stourbridge): What assessment would my hon. Friend make of the impact of the Chancellor's speech on small businesses in my Stourbridge constituency, bearing it in mind that half of them are located in the black country—a very deprived area?

Nigel Griffiths: We must ensure that the communities for which my hon. Friend speaks enjoy the general economic prosperity. The Phoenix fund and other DTI measures are ensuring that companies get a chance to start and to grow in such communities. I know that she will welcome the simplification of tax for small business that was announced the day before yesterday, among other useful measures. The VAT simplification is helping up to 900,000 businesses, and the simplification of taxation for small businesses is helping up to half a million firms. I hope that all those measures will persuade more firms to locate in her constituency.


4. Mr. David Amess (Southend, West): If she will make a statement on changes in trends in inward investment into the UK in the last six months. [16472]

The Minister for Employment and the Regions (Alan Johnson): The trend in the past six months has been for overseas companies, especially from the United States, in the aftermath of 11 September, to delay plans for investing abroad. That reflects worsening global economic conditions. Invest UK continues to register successes and receive fresh inquiries from north America and our other traditional sources of foreign investment in Europe and Asia-Pacific. We are confident that we are maintaining the United Kingdom's position and attracting more inward investment than any other European nation.

Mr. Amess: Sadly, I do not share the Minister's confidence. Will he explain to the House how, according to an Ernst & Young survey, the number of inward-investment projects coming to Britain has dramatically fallen in the past six months? Is not it a fact that, under the previous Conservative Government, there was a competitive advantage that this wretched and incompetent Government have completely frittered away as a result of increased taxation and more regulation and red tape?

Alan Johnson: We are all in danger of getting vibration injury when the hon. Gentleman asks a question in the House. He has not kept abreast of what has been

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happening in the global economy in the past six months. With regard to his question, the OECD report published only this week stated that the UK was

The recent economic intelligence unit report confirmed that the UK has been one of the most attractive business locations in the world for the past four years and said that we were likely to remain so for the next four years. We are third in the world at attracting inward investment and the No. 1 in Europe. That is a splendid record, especially in comparison with that of the previous Conservative Government.

Mr. Andy Reed (Loughborough): While I recognise the importance of inward investment—as a former economic development officer, I can say that my colleagues and I spent a lot of time trying to attract it—does the Minister agree that the vast majority of jobs in constituencies such as Loughborough will come from the growth of local firms and, in particular, an innovation and science base in places such as universities? What measures is he taking to ensure that those firms and other places receive equal support in growing small and local jobs? In particular, may I refer him to companies such as DataLink Ltd. in my constituency, an engineering firm that has seen 37 per cent. growth last year and doubled its work force?

Alan Johnson: My hon. Friend makes an extremely important point and speaks from some experience. We set out earlier this year in a White Paper our plans to help local businesses to develop the good ideas that emerge from our universities and translate them into good products on the market. In terms of inward investment, last year alone, Invest UK recorded 869 decisions to invest in the UK, which created 71,500 new jobs.

Sir Robert Smith (West Aberdeenshire and Kincardine): Does the Minister recognise that one of the major attractions of this country for inward investment is the UK offshore oil and gas industry for production and exploration? Does he also recognise that the maintenance of the current infrastructure in the North sea is vital to the success of that industry and to the viability and attractiveness of future inward investment, and that nothing must be done to close down prematurely any of that existing infrastructure or damage that attraction and the ability to get the full potential out of the North sea?

Alan Johnson: In general, we have had some excellent announcements recently about investment in the North sea. However, my hon. Friend the Minister for Industry and Energy tells me that he would be very pleased to speak to the hon. Gentleman about the specific points that he makes.

Mr. John Whittingdale (Maldon and East Chelmsford): The Minister completely failed to address the points made by my hon. Friend the Member for Southend, West (Mr. Amess). The Ernst & Young study that showed the fall in inward investment is clear about what caused it. It points to declining competitiveness, rising costs and less flexible labour markets. The Financial Times has reported that, this year alone, about 8,000 jobs have been lost as a result of companies switching production to lower-cost countries overseas.

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Has it not come to something when even the European Commission reports that the regulatory burden in Britain is heavier than anywhere else in the whole European Union? Are we not now paying the price for that in lost business, investment and jobs?

Alan Johnson: I tend to think that behind that question is the suggestion that the introduction of the national minimum wage, and of the right to four weeks' paid holiday a year, is somehow affecting our competitive position in the world. That is just not the case. The previous Conservative Government had a pitiful record on attracting foreign inward investment. Under the Tories, foreign direct investment dropped to £7 billion in 1994. Under this Government, it had rocketed to £88 billion in 2000. We need no lessons from the Opposition on attracting inward investment.

Andy Burnham (Leigh): The Minister is aware of the problems of the decline in manufacturing industry in my constituency, and I am grateful for his help in addressing them. Is he aware of the good news of the increasing role that small local companies are playing in my constituency—particularly innovative local companies that have gone from being small businesses to medium-sized businesses, such as Patak's, and Waterfields Bakeries? How does the Department propose to recognise and reward innovative good practice in small companies, and turn good ideas into business success stories?

Alan Johnson: My hon. Friend raises an important point. One of our main projects to encourage small businesses to innovate and be more creative is the SMART award—the small firms merit award for research and technology. I am pleased to announce that my right hon. Friend will release details later today of the latest 37 companies to benefit from the DTI SMART funding scheme. The SMART award has increased annual turnover in the economy by £2.4 million for every £1 million invested. It has boosted annual turnover and annual exports, and is part of the Government's commitment to help companies to turn new ideas and technology into prosperity and jobs.

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