Sunday, March 28, 2004
Tied up in red tape
Posted by David Smith at 08:50 AM
Category: David Smith' s magazine articles

Scratch most businessmen and not far below the surface there will be a concern about red tape and regulation. Not only that but there will be a strong belief that things are getting worse, that new and more onerous forms of bureaucracy are being layered on top of those already in place.

For many in industry, red tape is a bit like traffic jams or trash television. It undoubtedly exists but there is not much you can do about it. And ministers keep insisting that the problem is getting better, not worse.

Now, however, we have firm evidence that this is very much not the case. The British Chambers of Commerce (BCC), in its latest burdens barometer, estimates that the cumulative cost to business of red tape and regulation introduced under this government has risen to more than 30 billion. That is up by a staggering 46% on the 20.6 billion estimate of a year ago. What is more it excludes the national minimum wage, the cost of which to business is 13.5 billion and rising.

How can anybody possibly guess at the cost of red tape? A good question, but this is the beauty of the BCC’s estimates. All the figures are taken from the government’s own regulatory impact assessments (RIAs). Thus the only guesswork involved is on the part of officials but the government cannot deny its own estimates.

Where does the burden of red tape fall heaviest? In terms of the cumulative burden, new employment regulations and payroll obligations rank highest. The biggest single burden is represented by the working time regulations – the 48-hour week and associated rules – introduced five years ago, with the cumulative cost to business now 11.1 billion. Other big ones include the data protection act, 4.6 billion, changes in vehicle excise duty rules, 4.2 billion, the control of asbestos at work rules, 1.4 billion, disability discrimination regulations, 1 billion, and the IR35 contractors’ rules, also 1 billion. In some ways, however, the biggest damage is done by the sheer range of rules and regulations, and their quantity, rather than any individual measure.

As David Frost, the BCC’s director-general, puts it: “British business cannot compete with a 30 billion millstone around its neck. Government must simplify the UK's regulatory framework, and properly assess both the costs and the benefits of new regulations. Their own rules require them to do this.”

What can we do about red tape apart from moaning about it? The first thing is to get the government to recognise the problem. Gordon Brown argues that, just as farmers complain about the weather, businessmen will always gripe about red tape. Go to any country in the world, he argues, and you will hear the same complaints, even in America, supposedly the land of the entrepreneur. The key in Britain, though, based on the government’s own figures, is that things are getting worse at a faster pace than elsewhere.

The second requirement is to have realistic ambitions. Governments are not going to scrap regulations they have introduced, often as in the case of employment rules with a political fanfare. What they might be persuaded to do is tear up some of the regulations introduced by their predecessors. The idea of “sunset” clauses in the regulatory framework – phase them out when they have served their purpose – should be the way to proceed.

Third, business has to keep the pressure up, not give up on the argument that it is not a battle worth fighting. The Treasury claims it is interested in creating a genuinely enterprise-friendly environment. The planned merger of Inland Revenue and Customs & Excise, unveiled in the March 17 budget, is intended to ensure that small and medium-sized businesses are only encumbered with one set of taxmen. Treasury ministers should be kept to their word.

Red tape is undoubtedly shackling British business. A vital challenge for the next few years is to find ways of cutting through it.

From The Manufacturer, April 2004