Less red tape and better regulation

Philip Rycroft, Chief Executive, Better Regulation Executive

Businesses are familiar with the idea of “red tape” tying them up in knots; it is a consistent complaint from firms and a popular image in the media. But it is one which does not reflect the reality of the situation writes Philip Rycroft, Chief Executive of the Better Regulation Executive.

The World Bank, for example, does not share this view. In its recent report, The Ease of Doing Business, it ranked the UK’s business environment as the best in Europe and the fifth best in the world. This is an improvement on last year, when the UK was ranked sixth overall, and reflects the considerable efforts across government to make life easier for businesses to start up, invest and grow. It is the aim to improve this position even further, not just to help companies out of the economic down, but to ensure they are best placed for the economic upturn when it comes.

A key element in the creation and maintenance of a strong business environment is making sure the regulatory framework is robust and responsive. Striking the right balance between the needs of businesses, as well as delivering the essential protections and economic support and stimulus, is vital.

The Government is keenly aware of the concerns from businesses over the costs of regulation, especially in the current economic climate. It is often seen as a barrier, taking valuable time and money away from the important work of running and growing a business. This is why it has an ambitious programme of cutting the costs of existing regulation as well as minimising the costs, and maximising the benefits, of new regulation. The Better Regulation Executive, at the Department for Business, leads this work with the aim of making life as simple as possible for businesses. It works with the rest of government to challenge, improve and even cut new and existing business laws.

The Government set a target of cutting the paperwork costs of complying with regulation for business by 25 per cent by May 2010. We are on track to meet this challenging target that is expected to deliver £3.4 billion in annual net savings. So far it has helped save more than £2 billion a year for businesses through a wide range of “simplifications”: getting rid of unnecessary measures such as the requirement for private companies to hold AGMs and appoint company secretaries; simplifying necessary processes such as online “good enough” risk assessments; and saving firms time and money through employment law online tools.

Responding to the economic climate, the Government recently announced, as part of its next steps on its regulatory reforming agenda, changes to the timing of a number of planned regulations that will defer around £3.5 billion in costs to businesses. And committed to tackling the long-term costs as well as the short, it also announced a new target to cut the ongoing costs of regulation by a further £6.5 billion over the next five years.

But it is not all about cutting costs, however important that is. Central to the work of the Better Regulation Executive is changing the way the whole of government thinks about regulation and the way it regulates. For too long, regulation has been thought of as a no, or low-cost option. Getting government to think of the possible impact on businesses, and in particular small businesses, has been a major step forward.

Improving the accountability and transparency in the way government regulates has been a fundamental part of this culture change. For the first time, the Government published a list of all the business -related regulation it plans to introduce during the next 18 months, giving the business community and government a much better understanding of the bigger picture. It will also give companies more time to plan and prepare for the introduction of new business laws.

Whenever government departments or regulators start thinking about a new regulation, they have to analyse what the expected impact will be on the business community and, in particular, the impact on SMEs. By making this public and open to scrutiny, it will help them focus on making regulation as efficient as possible and making sure benefits outweigh the costs. To aid this process, the Better Regulation Executive also recently published the UK’s first benefit-cost ratio, showing that, for 2008–2009, benefits outweighed costs by nearly two to one. The ratio will be published annually, helping to increase understanding and awareness of the impact regulation is having.

Helping to untie the myth of tangled red tape also means focusing on making the case for the benefits of regulation which is all too often overlooked in the debate over costs. The Better Regulation Executive recently published a detailed report, along with some important new research, that examined the scope and quality of the benefits that regulation can deliver. Based around six case studies, the report illustrated how better regulation principles and practices deliver a range of positive outcomes.

The research showed that nearly two thirds of people in Britain agreed that they benefit from regulation in their everyday lives and more than 70 per cent think that the benefits of regulation outweigh the burdens. This is a positive starting point in the much more challenging process of getting the business community to change the way it feels about regulation.

Part of the Better Regulation Executive’s work is getting the message across that good regulation is good business practice. It provides essential protections and delivers a wide range of benefits to businesses and society in general, from the safety of the food we eat to the quality of the environment we live in. And it can stimulate and support economic growth, for example, by supporting common standards for products, which help lower transaction costs and build trust, contributing around £5 billion a year to the UK economy. And it helps improve living standards and reduce inequality, as the million or so people who benefit from the National Minimum Wage would agree.

The National Audit Office’s recent report on business perceptions of regulation also reflected the progress that is being made. There were significant improvements in the number of businesses who considered paperwork less burdensome and found guidance and advice on complying with regulation had improved.

But getting to the heart of changing perceptions means that working with government and regulators, to change the way they work, is only part of the story. To get a real understanding of how regulation impacts on businesses, the best way is to talk to business directly, to listen to what irritates them and get their ideas for changing things. This is why we have been visiting the UK regions, meeting with local businesses, more than 3000 during the last year, to get a better understanding of the issues affecting them and showing how the Better Regulation Executive can help.

And listening to businesses and getting their feedback has already paid dividends. The dispute resolution process, that was updated a few years ago to make it more efficient and straightforward by a threestep procedure, is a good example. Businesses started telling us that it was making things more complicated and driving more minor employer – employee disputes to the tribunal stage. So the process was reviewed and, after consulting with the business community and others, a revised system was put in place in April this year. It is making things simpler for businesses, saving them an estimated £175 million a year.

The Better Regulation Executive actively encourages businesses to give them their ideas of how to change things, not just through its regional visits, but also through its website which has a facility to make sure any suggestion you have gets to the right person in government who will respond within 90 days (see link below). With more than 1000 suggestions over the last two years, about a third have either been taken forward as new ideas or are already being implemented or considered by government.

Getting the attention of businesses, to generate and capture their ideas, is absolutely vital. The Better Regulation Executive works closely with the National Business Awards to reach as many businesses as possible. It is paying dividends with a number of nominations from the private sector for the Better Regulation Award this year. This shows how better regulation has not only embedded itself across government, but is having a positive impact on businesses too. They are not just feeling the benefits of better regulation, but working in partnership with the public sector to deliver it.

Changing the way government thinks about regulation, and puts the ideas and principles of better regulation into practice, is a real challenge. Changing the way the business community thinks about regulation, transforming the negative image of red tape to a more balanced picture including the benefits it delivers, is arguably a greater challenge. But we are making real progress in culture change, as well as shifting perceptions. Getting business on board is key to a shared success that helps deliver better regulation, with costs kept to a minimum, benefits maximised and making life as simple as possible.

For further information and to make any suggestions:
w: www.betterregulation.gov.uk

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