Red tape remains a major challenge for business regulation

Monday 10 December 2012

Business confidence

New red tape from the UK government and European Union risks stifling business growth, a leading business lobby group has claimed.

According to the Confederation of British Industry (CBI), ministers need to "get a hands-on grip" on the bureaucracy stemming from Whitehall and Brussels.

The body said "urgent action" is needed to tackle an ingrained culture where there is too little detailed thinking about the real impact of regulation on business.

CBI figures indicate that the net added cost of regulation on UK businesses will increase by £177.7 million as a result of policies created in 2011 alone.

The organisation said that for every £3 of costs removed, another £5 was added.

As such, it has called for the government to implement its new 'one in-two out' rule for business regulation as soon as possible.

Not doing so risks the UK becoming less internationally competitive, the CBI claimed.

Good regulation, bad regulation

Katja Hall, chief policy director at the Confederation, said regulation has "an essential role to play" in a thriving market economy, promoting competition and protecting consumers.

However, she said that all too often, it can be a major barrier to growth.

“The Autumn Statement contained some really welcome proposals to improve the accessibility and accountability of the regulators that enforce many of the rules, but the facts speak for themselves," Ms Hall stated,

"[Businesses are] telling us they are drowning under the weight of extra regulation coming out of Whitehall, layered on top of outdated red tape which has not been repealed."

She said the government needs to back up its words with action, by ensuring out of date rules expire, and new ones are personally signed off by a regulation minister.

"We want a culture shift in Whitehall, with greater transparency and accountability in how regulation is created, and more detailed analysis of what it will mean for businesses, with civil servants bringing in external expertise to fully inform thorough impact assessments," she stated.

CBI proposals for business regulation

The CBI has made eight practical recommendations to improve the quality and volume of regulations that businesses have to comply with.

In the short-term, the organisation wants to see the Regulatory Policy Committee be made truly independent.

The CBI is also calling for a presumption in favour of sunset clauses - where business regulations expire upon a certain date - and improvements to impact assessments.

In the medium-term, it believes economic regulators should be made more accountable to their sectors and the wider economy, and parliament should be tasked to interrogate regulations.

Embedding the Red Tape Challenge into government practice would also be a positive move, the CBI claimed.

In the longer-term, the CBI wants the government to deliver a clear regulatory lifecycle, and for the civil service to commission and curate - rather than create - policy options.

According to the CBI, 47 per cent of government departments increased the regulatory burden last year, while just 29 per cent reduced it.

Posted by Dan Smith