Business Regulation System To See Radical Change

Business Regulation System To See Radical Change

The Government has announced a series of measures aimed at reducing the cost, and level, or business red tape.

As of 1st September 2010, a new one-in, one-out system is to be introduced.

When Government departments wish to implement new regulations that impose costs on businesses, they will have to identify current regulations with an equivalent value that can then be removed.

To bolster the approach, and ensure that the cost of red tape is being addressed across the whole of the UK economy, the Government will also introduce other policies.

These include a set of principles of regulation that Government departments must apply when considering the effect of new regulations on businesses, social enterprises, individuals and community groups.

Also, the Regulatory Policy Committee (RPC) has been given extra powers so that it is more closely involved in the early stages of legislative planning.

The RPC will consider new regulatory proposals and consultations, and ministers will be given an independent view on whether or not there is sufficient evidence and analysis to support the regulation before they decide whether or not to go ahead with it.

It has been claimed that regulation compliance last year cost UK businesses £88.3 billion.

Initially, the reforms will apply to UK legislation only, although the Government has promised to take a more rigorous approach when dealing with EU regulations.

This will mean an earlier engagement in the Brussels policy process, and an ambition to end the so-called ‘gold-plating’ of EU regulations so that when European rules are transposed into UK law it is done without putting British business at a competitive disadvantage compared with other European-based companies.

Vince Cable, the Business Secretary, said: ‘Together these measures represent a fundamental shift in how Whitehall has traditionally used regulation as a way to command and control. We have to move quickly delivering credible and meaningful reductions in the burdens that hinder hard-pressed businesses and charities. We have to create a common sense approach in the way we think about new laws.’

‘By ensuring regulation becomes a last resort, we will create an environment that frees business from the burden of red tape, helping to create the right conditions for recovery and growth in the UK economy.’

Chairman of the RPC, Michael Gibbons, added: ‘Poor understanding and assessment of the impact of a proposed regulation can result in unintended consequences, costs that out-weigh the benefits and a failure to deliver the proposed policy objective.’

‘I am delighted we will now be able to add real teeth to this important scrutiny function. We will be able to challenge poorly-evidenced regulatory proposals much earlier.’

‘For the first time, there is a quality control system which will encourage robust, evidence based proposals and identify those that fail to make a case for intervention, which could be 20 per cent or more based on our previous work.’

Positive Business Response

Business groups have broadly welcomed the initiative.

Adam Marshall, director of policy at the British Chambers of Commerce, described the one-in one-out rule for new regulations, together with stronger scrutiny of both domestic and EU regulatory proposals, as a step forward.

He said: ‘The RPC has already made a real difference – holding Whitehall departments to account by rigorously assessing proposed regulations. At a time when businesses need every chance they can get to help drive economic growth, the beefed-up role for the Committee is essential. In Brussels, improving UK engagement at an earlier stage of EU law making will mean that UK plc has a much better chance of cutting off damaging regulation before it hits businesses, rather than closing the stable door after the horse has bolted’

Jane Bennett, head of campaigns at the Forum of Private Business, said: ‘The concept of introducing regulations only as they are needed is absolutely necessary given the existing burden on small businesses, but it will require a change in behaviour for many government departments.’

‘The RPC must be a real watchdog influencing departmental practice if it is to bridge the gap between over-regulation, which is what we have now, and lighter-touch intervention. That means being able to enforce those principles of regulation, which are as yet undefined.’

Stephen Robertson, the director general of the British Retail Consortium, conceded that not all regulation is bad but pointed the finger at poorly thought out regulation, and welcomed any practical proposal to get rid of costly and unnecessary rules.

However, Mr Robertson warned that a number of key issues still remain unanswered. He continued: ‘Will the sector being affected by the ‘one in’ be the same that is compensated by the ‘one out’?’

‘The impact of the ‘one out’ must be comparable to the impact of the ‘one in’. To be effective, the RPC, which is to vet impact assessments, needs to be more rigorous and independent than it has been in the past.’

Scepticism was at it’s strongest at the Institute of Directors.

Alexander Ehmann, head of regulatory affairs at the IoD, questioned whether the one-in, one-out system will focus solely on costs rather than on a looser off-setting process.

He said: ‘New detail from the Government on the proposals, such as the face that the one-in, one-out system will consider ‘business benefits’ as a means of reaching a net cost for regulations is concerning. The approach should be to identify pure costs to business alone, rather than encouraging the creation of a ‘regulatory offsetting’ industry in Whitehall where civil servants attempt to capture hypothetical business benefits.’

Referring to the new role for the RPC, My Ehmann added: ‘Having outside advice provided to the Government on regulation is one thing, but membership of the RPC includes significant consumer and trade union interests.’

‘There are hardly going to encourage the most radical of scrutiny of our regulatory overload in the UK. If the Government were really committed to easing the burden on business then the RPC would have been composed of business and their representatives alone, providing the real challenge of red tape that Government so desperately needs.’

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