Oral statement to Parliament

Cutting the burden and costs of regulation

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Introduction I’m grateful to Politeia for this opportunity to speak about Government’s approach to deregulation. It’s a subject which has …

Introduction

I’m grateful to Politeia for this opportunity to speak about Government’s approach to deregulation.

It’s a subject which has the capacity to bore, in general, yet excite in the specific. Everyone has a daft red tape story yet getting the media to focus on the overall pitch is very difficult.

This is compounded by the delay between Whitehall, Westminster and the real world of business. What we do in policy making, rarely impacts for at least a year. So our work over the last 18 months has not yet been felt, but I am confident it will start to be noticed as 2012 progresses.

We inherited a regulatory regime which was creating the equivalent of 6 new regulations every working day: 30 every week.

So we took the view that simply scrapping say 100 regulations wouldn’t make any difference. Instead, we have taken the brave decision to challenge the very central culture of routine regulation.

This means seeking to make legislation the last resort, when seeking to address business issues. It means tackling the flow of new regulations by making the process more difficult and alternatives easier. It means making a concerted effort across the whole of Whitehall to cut the 11,000 existing regulations which affect business. And it means tackling the EU machine, in Brussels, and here in the UK.

So in my remarks today, I’d like to address the flow of new regulation; the stock of existing rules; help for SMEs; EU regulation; and our work in enforcement, to end the tick box culture of many of the UK’s regulators.

Flow

To stem the tide of new regulation, we adopted a strategy that had never been tried before - what we call a ‘one in, one out’ regime.

This means that if a minister wants to introduce a new rule, they first have to identify a corresponding cut in regulation elsewhere. The aim is to encourage ministers and their departments to look for alternatives, before seeking to legislate.

This simple principle will allow us to first cap and then cut the cost burden of regulation to business, especially small business.

In our first full year, 2011, the cumulative savings to business reached £3.4 billion. This sum is made principally of one large measure, but beneath this we are already seeing a reduction in the volume of new regulations. Thus, in the second half of last year just 9 new measures posing a cost to business were introduced, against 25 measures which are deregulatory.

Tomorrow we shall publish the third Statement of New Regulation for the first 6 months of 2012. Now I mustn’t give too much away before we report to Parliament, but I can tell you that we are continuing to make good progress:

  • There has been a further reduction in the costs of red tape to business.
  • The volume of deregulation far outweighs new measures introduced.
  • Among the small number of new measures coming into force, the largest (in terms of cost to business) is the reform of the Air Travel Organisers’ Licence (Atol) scheme - a change supported by, ABTA, the main travel industry body.
  • In addition to reducing the flow, we are also increasing predictability for business. We are committed to publishing our regulatory plans earlier, so companies can plan for them with confidence.
  • So, in our first year, we can honestly say that instead of 6 new regulations every working day, we’ve seen just 19 regulatory measures, across the entire year.

Stock

The second important strand of our work is to reduce the stock of regulation already on the statute book - through the Red Tape Challenge.

We are systematically working our way through the 11,000 rules and regulations that affect businesses - asking companies to tell us which ones should stay, and which go and which overhauled.

I’m pleased to say that we have already signed off plans for around 1,200 of them, with over 600 being scrapped or substantially improved. These changes will be implemented over the coming year or so. Some examples - we have:

  • already repealed 98 Trading with the Enemy regulations which are long out of date;
  • completely overhauled entertainment licensing especially to help small venues;

  • consolidating 12 different types of consumer legislation into one streamlined Consumer Bill of Rights;

  • reforming employment tribunals, saving businesses over £40m per annum;
  • and, rationalising food labelling regulations - down to 17 from 31.

Alongside the Red Tape Challenge, other Government Ministers have instituted important deregulatory measures which we’ve been able to influence. For example, the National Planning Policy Framework, where 1000 pages of guidance are being streamlined. And Health & Safety, where up to one million sole traders who pose no risk to others are being freed from the provisions.

SMEs

SMEs are most affected of all by regulation, especially by legislation designed for larger enterprises. That’s why we introduced a moratorium on new regulations for micro businesses (those with fewer than 10 people); for example, from the tobacco display ban. And why they are exempt from pensions auto enrolment until 2017.

It’s also why we scrapped the Right to Request Time to Train - saving SMEs £380 million.
And won exemption for micro businesses from the European Union’s accounting rules, saving them up to £300m per annum.

EU

Of course a policy that seeks to tackle regulation must recognise that around 50% emanates from Brussels. That’s why we are taking a similar comprehensive approach to tackling the issue both here and in each EU institution.

It begins with a clear commitment to end the routine gold-plating of EU rules, which became all too common across Whitehall. In future, we will merely copy EU directives into domestic legislation. No embellishments unless it’s in our interests.

But that alone is not enough.

Ministers are actively engaging much earlier in the process, so we can better influence the outcome and protect the interests of UK businesses.

This is also why I worked with British and German MEPs to secure agreement for a new unit to be set up within the European Parliament. At last, the cost of late amendments to legislation will be known and this will help businesses counter unnecessary interference. I’m very grateful to Malcolm Harbour MEP for his help.

At the same time, we have secured a presumption that micro-businesses are exempt from future EU directives, unless there are compelling reasons to the contrary.

These concessions are largely in part thanks to the personal leadership the Prime Minister has shown in the European Council on this issue. And he is continuing his efforts, with a powerful letter just last week to President van Rompuy urging decisive action to cut regulation under a comprehensive EU growth plan.

Enforcement

Finally, turning to the regulators. Alongside efforts to cut back on red tape, we also need to improve the way that rules are enforced, to keep costs to a minimum and work with, not against, the grain of businesses that are already compliant.

So we are extending the Primary Authority Scheme so more businesses can benefit from a consistent common sense approach to local enforcement. Almost 1500 partnerships covering 47,000 premises (and more than 450 businesses) with over 1.2 million employees are already benefitting.

In addition, we are ending the tick-box inspection culture - the emphasis must be on achieving the desired result rather than adhering to rigid procedures; questioning whether ensuring compliance should always involve the state, or whether there’s scope to build on some of the already-successful business-led models of enforcement.

And we are going to review the impact of front-line inspection and enforcement on business, looking from the perspective of the user across different sectors, focusing not just on the national enforcement bodies but also local regulation, identifying overlaps and weeding out whatever becomes clear is unnecessary.

And we have pledged to include a sunset clause in the founding legislation of any new regulatory body, should it be necessary to set one up in future.

Conclusion

The reforms I have outlined are more than just a piecemeal attempt to cut excessive, redundant or ineffectual rules and red tape - it is a comprehensive plan of action designed to change the very culture of Whitehall, so that regulation becomes the last resort, and not the first option.

But we recognise that there is very much more to do. There has been a generation of policy-making founded on the belief that regulation, and legislation, are the default answer.

This won’t change overnight - but we are determined to pursue this issue remorselessly, so we free up enterprise in Britain to grow and prosper for the benefit of us all.