Coalition fails to cut red tape

Tim Wallace
Follow Tim
THE GOVERNMENT’S plan to slash red tape and free up businesses to grow has failed, a leading business group said yesterday, with regulatory costs soaring and ministers fighting a losing battle with the tide of EU regulation sweeping the country.

City representatives and business campaigners called on the government to renew its efforts, citing rules ranging from parental leave to banking capital requirements as examples of excessive burdens which could easily be scrapped or lightened.

And Boris Johnson called on the government to renegotiate the UK’s relationship with Europe to “chop off the bits we don’t like.”

CBI research published yesterday found the burden on firms increased by a net total of £177.7m as a result of policies introduced in 2011, with only £3 being cut for each £5 of costs added.

It found a net extra cost of £89.1m from domestic rules, and £95.8m from EU regulations.

According to the World Economic Forum, half the countries in the world have lighter regulation than the UK, which places just 72nd.

The government had pledged to stick to a “one in one out” rule, where any new regulation must be matched by the reduction of other rules representing an equal financial burden – but the CBI research confirms that it has failed to deliver on this key promise.

The British Chambers of Commerce (BCC) said there is plenty of room for more to be cut, suggesting new parental leave rules be the first to go.

“This is the seventh change to parental leave rules in a decade – each one is a new administrative burden for firms and adds new uncertainty,” said the BCC’s Adam Marshall.

And campaign group TheCityUK argued the rapid introduction of banking rules may damage the financial services sector and hurt growth.

“We want a more robust regulatory regime, but it must be introduced carefully to avoid stifling growth,” said chief Chris Cummings. “On the Basel III rules, the UK is going further and faster than other countries, which will hit GDP by up to two per cent.”

However the department for business, innovation and skills claims changes in domestic rules in 2011 brought an annual saving of £3.5bn for UK firms, while EU rules increased the burden by £1.7bn, leaving a net reduction in the burden of £1.7bn.

“We are determined to go further and faster to lighten the load of regulation for UK firms,” said minister Michael Fallon. He added that they are “working hard to stem the flow of regulation from the EU.”

Meanwhile David Cameron is preparing a new policy on the EU, aiming to repatriate regulatory powers in areas like fishing and employment.

72nd The UK’s terrible world ranking on regulation
Source: WEF

83% of firms say that cutting red tape would make it easier to invest
Source: CBI

£89m The net cost to firms of new UK red tape in 2011
Source: CBI

£95m The burden from new EU regulations last year
Source: CBI