Mark Prisk is Minister of State for Business & Enterprise and is MP for Hertford & Stortford:
Cutting the burden of regulation is vital if we are to help the private sector grow. This is especially the case for small and medium sized enterprises that face disproportionate costs from unnecessary red tape.
Under Labour the burden of regulation grew inexorably, to the point that by the time of the May 2010 election it was implementing the equivalent of 14 new regulations every working day. The Federation of Small Businesses has worked out that this meant that the average small business is spending the equivalent of seven hours every week just complying with Government paperwork.
So what is the new Government doing to reduce the burden? Last Friday the Prime Minister set out a clear new direction. As he said:
- “As someone who believes in the free market, it will not surprise you that I believe a big part of the previous Government’s economic failure was their endless interference. There was too much tax, too much regulation, too little understanding of what our businesses need to compete.”
So we intend to take an entirely different direction, in seeking to tackle the burden of regulation. This week we have published the first phase of our action plan.
First we will introduce a ‘one-in, one-out’ rule whereby no new regulation is brought in without other regulation being cut by a greater amount. This capping of regulatory costs represents a crucial change for the whole of government and how Whitehall works. It means that policies will be measured not just against their financial cost but against their regulatory cost. Ministers will be keen to remove existing burdens and will be actively encouraged to seek alternatives to passing new laws.
Second, we have announced a new Cabinet ‘Star Chamber’ to police the regulatory system. The Reducing Regulation Committee will bring together the key players needed to tackle red tape right across Whitehall.
Third, we have now announced that the first task of the new committee will be to undertake a fundamental review of the huge legacy of regulations, left by the last Labour Government. Just as Lord Mandelson used his last days in office to scatter public money for party advantage, so many of his fellow Labour Ministers pushed through new laws which will adversely affect the competitiveness of UK business. Indeed some estimates have put the cost of these ‘Labour legacy’ regulations at £5 billion in the period up to next Spring. So we are determined to review the entire list of regulations so see how we can best lift the burden for business.
Of course more needs to be done. We want to ‘sunset’ regulators, to limit their remit, reduce their number and reduce the costs of compliance. Equally we are determined to end the culture of tick-box inspections and instead target on the real high-risk organisations, leaving the law abiding in peace.
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7 Comments
Short-term I think this a fantastic idea, though I suspect the paragraph relating to Mandelson’s last acts in government probably overstate the potential damage caused. The UK seems to have an incredible ability to make the worst possible situation out of bureaucracy as shown by the fact that we could not run nationalised services that other countries run without massive problems that other countries don’t have and the impact of EU regulation in the UK compared to other member states. I recall hearing about one piece of EU legislation relating to agriculture that was implemented in the form of an eight page document of guidelines for farmers in Holland and an eighty page document in the UK! Of course, as I can’t recall the details do take this with a massive pinch of salt.
However although there is something about us as a nation that seems to make perfectly sensible legislation turn into some choking lethal net somehow by the actions of those who implement it I think that there are real dangers here:
Firstly, the baby could be thrown out with the bathwater – a significant amount of the problems with overregulation are to do with the implementation of the regulation rather than the regulation itself – a good example of this is health and safety legislation which is by and large reasonably sensible but which is sometimes interpreted so overzealously that you end up with the, sometimes true, horror stories you can probably read about in the Mail, Express or Telegraph. I am aware that there are many in the Conservative party who wish for this kind of legislation to be rolled back and this worries me as the legislation itself is not where the problem lies – you would be treating the symptom rather than the cause and possibly removing perfectly useful legislation in the process.
Secondly, the axe could come down too hard. An unregulated market is not the same thing as a free market – a free market is an ideal where companies succeed and fail based entirely on their merits and where luck and previous position count for nothing – it is meritocratic and very competitive. This isn’t how capitalism usually works though, for instance bad luck with short-term investors led to Cadbury’s ceasing to trade as an independent company, Zavvi’s collapse was more due to mismanagement of Woolworths than anything that Zavvi itself was responsible for. In the former case additional regulation on investments could have resulted in a perfectly healthy successful company remaining independent – despite having more regulation this is arguably a more free market than one without this regulation. In my view, part of the role of a government is to insulate areas that should ideally not be run in a capitalist fashion (such as healthcare) from the markets, as much as is possible, and to attempt to make everything else as close to an actual free market as possible. And that does not just mean deregulation – which can also harm a free market as much as help it. For this reason the one in one out rule concerns me.
I think it is in general a good thing to cut down on red tape, although as Duncan Moore says health & safety legislation is very much needed to protect employees and the public. Most of it is sensible; the problems are mostly caused by silly interpretations.
My husband has a very small business (a book shop employing himself and three other staff) and one of my sons has a small business, very high tech electronics, employing thirty people in Britain, three in Germany and two in the United States. Both look after their staff well and care about their well being; even so health and safety guidelines can be helpful because they do lay down a standard.
My son thinks that increased Capital Gains Tax would affect a medium turnover business such as his more than a really small business or a massive business. He thinks it can be a disadvantage to a medium sized business that needs to expand to compete with bigger businesses when it comes to applying for loans to develop.
Incidentally a third of my son’s employees are research and development engineers. I doubt if big companies could claim such a high proportion. It is a company which designs, makes, markets and sells its own goods all in house. They create driver boards for specialised screens and are a world quality company.
“First we will introduce a ‘one-in, one-out’ rule whereby no new regulation is brought in without other regulation being cut by a greater amount.”
‘One-in, two-out’ would be so much better.
The trouble with so much of Labour’s regulation is that it is basically aiming for an administrative solution to all problems – inevitably top-down, inevitably tending to unnecessary expense for business without due attention to the cost implications in relation to the benefits. And then, of course, those adminsitrative solutions fail to achieve the desired result anyway.
When it comes to a ‘free market’ it depends what you mean by that term. Too often it is used as cover for corporate oligopolists who know that the markets they operate in are far from ideal in ways that mean that their position is unassailable by smaller rivals. I bet that Judith’s husband and his staff give far better service than WH Smith (it’s almost impossible not too) yet WHS is secure because its size means that it will get far better trade prices than he does. How is the ‘might is right’ princlple in the public interest?
The meritocratic ideal summarised by Duncan in his last paragraph – in effect that markets should be regulated so as to be always contestible by smaller firms and new entrants – is a very different interpretation of ‘free market’ and would lead to a very different sort of regulation.
For example, in retailing it might mean adoption of a version of the US Robinson-Patman Act which put all retailers, large and small, on an equal footing as it did in the US until it was sidelined by Reagan as one of his first acts to promote the corporatist interpretation of the ‘free market’. Having worked in retail I am convinced it would lead to both better service and lower prices if introduced here..
http://uk.ask.com/wiki/Robinson–Patman_Act
I am always puzzled by these claims about government regulation. There are six of us in my business, and apart from doing the VAT once a quarter which takes three or four hours I spend pretty much zero hours a week doing things for the government. I am very health and safety conscious and when we have had inspections have welcomed any advice and instructions given to us by the HSE. I’m very much aware of the environmental implications of what we do and ensure that we act responsibly. Maybe I’m breaking all sorts of regulations that I’m not aware of, but honestly I just do not believe the FSB’s figure of seven hours a week can possibly be true.
I should also have said that I am impressed that a government minister from the other party in the coalition should have taken the time to write on LibDem Voice and presumably actually want to know the views of grassroots members of another party. I hope that this is a sign of how things will play out in the coalition and that LibDem ministers will reciprocate by writing for Tory websites (though from what I’ve seen of ConHome they would be liable to get a much more tribal response than Conservative ministers writing for LibDem Voice).
The only way small businesses can survive is by giving better service or producing better products.
My husband thinks that one of the biggest problems for small businesses is the abolition of retail price maintenance. There used to be a saying that you get what you pay for and I think this is still true, but no one says it any more. We’ve been brainwashed into thinking that the cheapest is always best value for money. This is not true. The cheapest item can often be the one that needs to replaced twice as often and can therefore be more expensive in the long run. Quality used to bean important consideration. I think that it is also an approach that is better for the environment on the whole. Replacing goods twice as often is bad for the environment because it uses up more resources, including energy, and it creates more waste.