Business Group Questions Government’s Red Tape Savings Claim

The Government’s claim to have capped the cost of red tape in 2011 doesn’t include key regulations that could cost businesses £1.5 billion, the British Chambers of Commerce (BCC) has said.

The twice-yearly Statement of New Regulation monitors the progress of departments in delivering the Government’s deregulation programme. It forecasts a net saving of £3.243 billion in red tape costs by the end of 2011.

However, the forecast does not include the Agency Workers Directive (AWD) which the BCC claims will cost businesses £1.5 billion to implement. The AWD will be introduced along with other new business laws on 1 October.

“It is good news to see that the list of regulations to be introduced this October is shorter than it has been in previous years.”

said BCC chairman John Walker.

“We also welcome the list of deregulatory measures – Government should be congratulated for that.”

“However, these messages will be completely undermined by the introduction of the AWD and many of the recent proposals to make further burdensome changes to employment law such as the extension of the right to request flexible working.”

The BCC also pointed out that red tape costs for the second half of 2011 were £45 million more than any savings achieved. Overall, the statement shows total savings in the cost of regulation of £3.581 billion in 2011. However, £3.342 billion of this comes from a single measure – the indexation of pensions – which, the report acknowledges, will be “largely offset” by the introduction of auto-enrolment in coming years.

Without the indexation of pensions, the Government’s own figures suggest that red tape would have actually cost businesses in the region of £99 million this year.

But nine of 15 government departments have introduced measures in 2011 that will reduce regulation costs. These include making it easier to inspect patents online and extending the scope of self-certification of building work, for example. Measures such as these are part of broader initiatives introduced in 2011:

  • A moratorium on new domestic regulation for micro-businesses and start-ups.
  • A ‘one in, one out’ system to stem the flow of new regulations.
  • The Red Tape Challenge – a public audit intended to streamline and simplify the 21,000 existing regulation. A total of 160 retail rules have already been earmarked for disposal or simplification.
  • The introduction of a ‘sunset clause’ for any new regulation, meaning it will have to be reviewed after five years.

Responding to the criticism a Department for Business, Innovation and Skills spokesman said:

“Very few regulations being brought in will introduce a new net cost to business. And this will be offset by a much higher number of deregulatory measures being brought in, which will reduce costs to business by over £227 million on an annual basis. This is in addition to the saving from the change in pension indexation.”

“However, we recognise there is more to be done. We are actively engaging with businesses through the Red Tape Challenge, which calls on firms and the public to let us know what they think of the 21,000 regulations on the statute book. Already we’re amending, scrapping or simplifying regulation in the retail sector. Employment law regulations will be the next theme to be scrutinised.”

Business Group Questions Government's Red Tape Savings Claim

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