IoD: Moratorium on Red Tape not enough

The Government’s pledge to exempt the smallest businesses from new domestic regulations doesn’t go nearly far enough, the Institute of Directors (IoD) has said.

The Chancellor confirmed in the Budget that the Government is introducing a three-year exemption from all new domestic regulation for small firms with fewer than ten employees, and will open a consultation on how this will be introduced. The IoD said that there was a danger that these micro businesses would be hit with an unmanageable red tape burden after the moratorium is removed.

The business group also said it was “disappointed” that the moratorium on red tape was only temporary, applies to only the smallest firms, and does not tackle existing administrative burdens.

“Over time, the Government needs to make the exemption permanent, otherwise there is a danger that when the three-year exemption expires micro-firms will be hit by a wall of regulation.”

said IoD director-general, Miles Templeman.

“We suspect that this will encourage many micro-firms to comply with new regulations as and when they appear, and not wait for the three-year exemption to expire. We should also remember that large numbers of small firms have more than ten employees and will get no respite at all.”

The Government also announced the removal of £350 million worth of regulation, including the costly dual discrimination regulation in the Equality Act which had not yet been implemented.

But Templeman said that this would not help firms with their present red tape obligations, adding:

“Exemptions from new regulations or delays to planned regulations cannot be portrayed as cuts — the huge existing red tape burden is left intact.”

However, Federation of Small Businesses (FSB) national chairman, John Walker, welcomed the moratorium, saying that it would encourage small firms to grow.

“For the next three years, it will give those micro-firms the confidence and stability they need to employ more staff without the worry of constant changes in employment law. You could argue that it will stop firms from employing more than nine staff, but if a business was offered a contract and needed more staff to do the work for it, they would be unlikely to turn it down for that reason.”

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