Malcolm Bruce looks at the problem of red tape faced by business

Written by Malcolm Bruce MP on Mon 21st Mar 2005

I read recently that complaining about red tape was becoming the business equivalent of complaining about the weather. The difference is red tape is not an act of nature, it's an act of Government.

The Liberal Democrats are not against regulation per se. Regulation is necessary in some instances for reasons of consumer, worker or environmental protection.

Our target is unnecessary, excessive and badly-targeted regulation. Business now acts as an extension of the Government machine without compensation: as its benefits agency (statutory maternity pay), debt collector (student loans) and financial adviser (Stakeholder pensions), to name just a few examples. The Government's own advisory body on regulation, the Better Regulation Task Force, estimates the administrative cost of regulation to be around £30billion annually.

We have to roll back those regulations which put an unnecessary burden on business, but deregulatory policies are only half the story. The Liberal Democrats want to institute a better regulatory process and this requires a cultural shift within Government that sees prescriptive regulation as a last resort.

The Liberal Democrats will create a Deregulation Unit. This arms-length agency will draw up impact assessments for all regulations. Transferring responsibility from the Government department introducing the regulation to the Unit will ensure independent scrutiny. The Unit will use a standardised method of calculating the impact of regulation, explore alternatives to regulation and assess how new regulations contribute to the cumulative burden.

The unit will also be ideally placed to head off problems such as goldplating and double-banking (where businesses have to comply with parallel UK and EU legislation), and to conduct post-implementation reviews.

As almost half of all regulation emanates from Europe it is also vital that the British Government engages earlier in the European legislative process. Bad regulation can't be ameliorated at the implementation stage. If we distance ourselves from the heart of Europe we deny ourselves the opportunity to shape European legislation in a way that suits Britain.

Currently, sunset clauses are rarely used. The Liberal Democrats would require them on all new regulations affecting business.

The Liberal Democrats will also improve the guidance given to business to enable planning and long-term investment. Guidance will be in plain English. There will be an online information gateway to current regulation and those coming on stream, and stand-alone websites devoted to those large regulations which are the responsibility of more than one department.

Significant inroads can be made in the amount of time companies have to devote to form-filling. Companies House for example pre-prints the information it holds on a company. When a company receives its annual return it need only check the details, make any changes and return it. We would like to see more regulators adopt this approach.

Finally, tax records and tax collection are burdens which should not be imposed on smaller businesses. Simplifying the tax system would enable small businesses to spend less on advice. That's as good as a tax cut.

Red tape can be reduced, and reduced through relatively simple measures. The importance of releasing business from the shackles of unnecessary administration can't be overstated. Businesses which are freed from dealing with regulations can spend more time producing and selling their goods, and the Government revenue released from maintaining an inflated bureaucracy can be redirected towards social priorities like health and education.