RED TAPE MUST BE SHREDDED NOT LOOSENED

THE coalition government has been talking the talk on economic growth in recent weeks. But it isn’t yet walking the walk. Well, they might occasionally be taking a few tentative, baby steps in the right direction. But it’s not enough. It’s nothing like enough.

In his budget later this month, the chancellor should announce a full scale assault on the red tape and regulation which is holding back British business. He needs to pledge to do everything possible to unleash this country’s entrepreneurial spirit. He needs to say that the state is making us unacceptably risk-averse, is much too eager to punish success and far too loath to reward hard work.

The message to British business – particularly small and medium-sized enterprises – needs to be unambiguous: “We are on your side and we are going to help you by getting out of your way”.

They should start with labour law. The risks – and associated costs of taking on new staff are now so high as to have a deterrent effect on even the most bullish and brave of employers. The government is extending the necessary length of service to two years before an employee can claim for unfair dismissal. But this is a modest step and doesn’t tackle vexatious and extravagant claims under equalities legislation.

Only a few days ago, I was informed of just such a case. An employee on £25,000 per annum asked for her desk to be moved as the area she was working in was too cold. Her employer obliged, but she then sought to sue for in excess of £1m for disability discrimination, as her new desk was apparently now too far away from the toilets. The claim was dropped, but the chilling effect that this can have on a company cannot be ignored.

If the cost of labour rises and rises, companies will employ fewer people. Unemployment will remain high – especially among young people seeking their first step on the career ladder.

In addition, we have a statutory health and safety regime that burdens business without meaningfully reducing risk. Small and medium-sized businesses should be given the option to be exempt from vast swathes of red tape.

It is completely understandable, of course, that people want to work in a safe environment. But we must not kid ourselves that the present regulatory environment comes without cost. The 20,000 or so regulations we have in Britain are estimated to cost businesses well over £100bn per annum. That is seriously stunting the country’s economic growth.

This government – like many before it – has promised a bonfire of red tape. But, at present, there is only a gentle smouldering. They need to reach for the blowtorch.

Mark Littlewood is director general of the Institute of Economic Affairs and an independent adviser to the government’s Red Tape Challenge.

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