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Seeing red

The government looks set to miss its own target for reducing the burden of red tape

A government pledge to set a “cast iron” target for reducing the
administrative burden on business by May 2006 looks set to be broken. The
pledge, made last year, was based on a recommendation in the report Regulation:
Less is More, by the Better Regulation Task Force.

The task force urged that the government should adopt a “standard cost
model”, first used by the Dutch government, to provide a systematic measurement
of the administrative burden on business.
To achieve that, John Hutton, the Minister for the Cabinet Office, announced
last September a “ground breaking” project “to measure, then reduce the amount
of paperwork and administrative costs that government regulations impose on
British businesses and charities”.

Hutton claimed that the government was “the first in the UK to face up to the
challenge by pledging to properly measure the scale of the problem and then set
meaningful targets to reduce it”.

Yet Financial Director enquiries at the Cabinet Office reveal that the
baseline calculations of the administrative burden on British business, together
with the reduction targets, won’t be released until the pre-Budget report, which
appears towards the end of this year, missing the May deadline by as much as six

Financial Director was told that work on the baseline figures was “ongoing”.
However, a number of departments have developed percentage targets for reducing
the burden of regulation by 2010. Cynics will note that the timing for delivery
of these targets lies beyond the probable date of the next general election,
meaning ministers won’t be accountable for achieving them before voters go to
the polls.

All talk

But business organisations have got used to the growing gap between
government rhetoric and delivery in this area. For example, a new report –
Regulators: Box Tickers or Burden Busters? – from the British Chambers of
Commerce (BCC), reveals that regulatory impact assessments (RIAs), first
introduced in 1998, have failed to slow the growing cost of new laws on

One of the report’s co-authors, 4 Tim Ambler, a senior fellow at London
Business School, says government departments go through the motions of
performing consultation exercises and RIAs, but few regulations are removed.
“There are no signs of any fundamental reduction in regulations, or, indeed, any
challenge to new regulations,” he says.

The situation is beginning to cause serious concern to business leaders who
watched Britain’s place in the World Economic Forum’s global competitiveness
league slip two places to thirteenth in the most recent rankings.

BCC president Bill Midgley says: “We cannot stand still while other economies
forge ahead. Dynamic economies demand flexible deregulated markets. From a
government that talks the talk of globalisation, they must walk the walk of
global competition and global markets.”

Complex tax

On the financial front, a survey carried out by PricewaterhouseCoopers after
the March Budget found that 56% of business people questioned believe that the
tax system has become more complex compared with competitors’ in recent years.

PwC tax partner John Whiting says: “We are continually hearing about
initiatives to cut red tape, but the challenge is really to deliver the cuts. An
increasingly complex and frequently changing tax system imposes its own
administrative burdens on business.”

Finance directors who felt the RIA regime could help to roll back red tape
have been sorely disappointed. By 30 June last year, government departments and
agencies had issued 1,443 RIAs since the system started in 1998. Over the same
period, the net cost to business of new UK and EU regulations has been £50.3bn
(see box), according to BCC figures.

Ambler believes that one problem with RIAs is that they vary in quality. In
the BCC report he and his fellow co-authors – Francis Chittenden and Kapil Ahuja
from Manchester Business School – recommend that generalised consultation on new
regulations should be replaced with “forensic testing” by “an independent

They say: “A fundamental problem is the mindset of regulators looking for the
easiest way to enact policy as distinct from finding the least bad way actually
to achieve the desired results.”

Shrouded in secrecy

Another problem is the secrecy that surrounds some of the work of stemming
over-regulation. When the BCC team asked to see the conclusions of the Panel for
Regulatory Accountability, which is chaired by Tony Blair and clears regulatory
proposals that are likely to impose a major burden on business, it wasn’t
available even under the Freedom of Information Act.

“The Freedom of Information Act is quite specific about the fact that the
evidence on which policy is based should be made available after it has been
considered by government ministers,” says Ambler.
The BCC team’s report adds: “We have been told that all this is to spare the
blushes of ministers. Regulating is good and failing to do so is too
embarrassing for them to admit.”

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