Government must tackle Whitehall red tape culture to free growth - CBI
'We want to toughen up the law so there is a presumption that every piece of regulation has a sunset clause'- CBI chief policy director Katja Hall
Economic growth faces being held back because of tens of millions of pounds in extra business red tape coming from the UK Government and Europe, the CBI has warned today.
In its new report Changing the rules – eight steps to a better regulatory regime, the CBI calls on ministers to get a hands-on grip on the red tape and bureaucracy created in Whitehall. It says that urgent action is needed to tackle an ingrained culture where there is too little detailed thinking about the real impact of regulation on business.
The report shows that the net added cost of regulation on UK businesses will increase by £177.7m as a result of policies created in 2011 alone, when for every £3 of costs removed, another £5 was added.
Businesses welcome new plans announced in the Chancellor’s Autumn Statement this week to make regulators more accessible and accountable, along with other strong reforms, including the “one-in, two-out” rule. However, businesses now need to see swift implementation, and the Government must go further.
Not doing so would risk the UK becoming less internationally competitive and will hold back investment at home. Three-quarters of firms surveyed by the CBI said that the regulatory burden has made the UK a less attractive place to do business in the past decade.
Katja Hall, CBI Chief Policy Director, said:
“Regulation has an essential role to play in a thriving market economy, promoting competition and protecting consumers, but we know it can be a major barrier to growth.
“The Autumn Statement contained some really welcome proposals to improve the accessibility and accountability of the regulators that enforce many of the rules, but the facts speak for themselves. Small and medium-sized businesses are the engines of growth, but they’re telling us they are drowning under the weight of extra regulation coming out of Whitehall, layered on top of outdated red tape which has not been repealed.
“We’re calling on the Government to back up its words with action. We want to toughen up the law so there is a presumption that every piece of regulation has a sunset clause, so it expires after a set date unless it is actively renewed.
“We want the regulation minister to personally sign off each extra piece of regulation and business laws to be subject to greater scrutiny in Parliament.
“We want a culture shift in Whitehall, with greater transparency and accountability in how regulation is created, and more detailed analysis of what it will mean for businesses, with civil servants bringing in external expertise to fully inform thorough impact assessments.”
This report sets out eight practical recommendations to improve the quality and volume of regulations that businesses have to comply with.
In the short-term
- The Regulatory Policy Committee should be made truly independent
- A presumption in favour of sunset clauses
- Improving Impact Assessments
In the medium-term
- Economic regulators should be made more accountable to their sectors and the wider economy
- Parliament should be tasked to interrogate regulations
- Embedding the Red Tape Challenge into Government practice
In the longer-term
- The Government should deliver a clear regulatory lifecycle
- The civil service should more often commission and curate – not create – policy options
On giving greater independence to the Regulatory Policy Committee, Ms Hall said:
"The Regulatory Policy Committee acts as a regulatory guardian, ensuring that the costs of regulation are properly accounted for. They could do this role even more effectively if they were given greater independence to run the system in the interests of better regulation, rather than having to haggle with civil servants over whether a regulation is an 'in' or an 'out' and how much it costs. In particular, with the introduction of 'one-in, two-out', it is vital that the Committee has the freedom to give fuller scrutiny to deregulatory initiatives."
On the need for a review of the core duties and obligations of economic regulators, Ms Hall said:
"Economic regulators play a critically important role in sectors of strategic importance, but they need to be made more accountable to their sectors and the wider economy. Their lists of duties and obligations have sprawled over time, making them impenetrable to smaller firms. These should be reviewed so that they are firmly focussed on promoting competition, consumer interests and growth. The announcements in the Autumn Statement are a welcome start, but need to go further.”
On tasking Parliament to interrogate regulations, Ms Hall said:
"Parliament must take more responsibility for regulation, and should play a far greater role in holding the Government to account. At present there is little scrutiny of departments' efforts to reduce regulations and the overall success of the Government's agenda. The Regulatory Reform Select Committee should be a thorn in the side of ministers, holding them and senior civil servants to account on an annual basis for their department's performance."
Statistics on the rising burden of regulation:
- The net regulatory burden on businesses will increase by £177 million as a result of policies created in 2011
- In 2011, 47% of government departments increased the regulatory burden, and only 29% reduced it
- In the first eight months of 2012, the Government produced more than two impact assessments per day for consideration by the Regulatory Policy Committee
- 73% of firms that are shrinking their workforce see regulation as an obstacle to success, compared to 55% for all companies
- The UK finished exactly halfway down global competitiveness rankings on the burden of regulation (72nd in the World Economic Forum’s Global Competitiveness Report), with more than a quarter of firms identifying regulatory factors as their biggest barrier to growth.