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Vince Cable announces plans to reduce existing red tape and review employment law and business regulation in the pipeline

David Woods , 03 Jun 2010

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Business secretary Vince Cable today announced an action plan to bring an end to the 'excessive' employment regulation that is stifling business growth.

Speaking this morning, Cable unveiled the Government's drive to reduce regulation, which is stifling growth, especially of small businesses. This Reducing Regulation Committee will be chaired by the business secretary and will enforce a new approach to new laws and regulations, ensuring that their costs are being properly addressed across the entire British economy.

He also announced an immediate review of all regulation in the pipeline for implementation, which has been inherited from the last government. The cost of implementing this amounts to £5 billion annually before April 2011 and £19.1 billion per annum thereafter. This will be the first action for the new Cabinet committee.

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 The business secretary also pledged a new approach that will control and reduce the burden of regulation.  A ‘one-in, one-out' approach, designed to change the culture of government, would make sure that new regulatory burdens on business are only brought in when reductions can be made to existing regulation. 

Cable said: "The deluge of new regulations has been choking off enterprise for too long. We must move away from the view that the only way to solve problems is to regulate.

"The Government has wide-ranging social and ecological goals including protecting consumers and protecting the environment. This requires increased social responsibility on the part of businesses and individuals.

"This is a real challenge and it will not be easy. We need to reduce regulation and at the same time meet our social and environmental ambitions. This demands a radical change in culture away from the tick-box approach to regulation only as a last resort. It's a big task but one worth striving for."

Commenting, David Frost, director general of the British Chambers of Commerce (BCC), said: "BCC research shows new employment regulations over the next four years will increase business costs by over £11 billion - so the announcement of an immediate review of all red tape in the pipeline is very welcome.

"At a time when we need business to drive recovery and create jobs, the cost of employing people clearly needs to be reduced. Employers consistently tell us that they will get on with creating jobs and wealth, but they need Government to get off their backs and let them do it.

"While the initial signs from this Government are very positive on reducing the burden of red tape, the coalition should remember that we will be subjecting them to the same level of scrutiny that we have with other initiatives over the years."

And the Forum of Private Business' (FPB) chief executive, Phil Orford, added: "Our calls for a comprehensive review of red tape finally appear to have been heard. The first job of the new star chamber will be to scrutinise all new regulations that are in the pipeline and that has to be welcomed.

"The Government must ensure that, in administering the work of the Reducing Regulation Committee, it does not create more bureaucracy to deal with red tape.

"If this is achieved, combined with the ‘one-in, one-out' approach and the work of the challenge group in devising innovative, non-regulatory solutions to social and environmental challenges, we look forward to an enterprise culture that is conducive to small business growth rather than restrictive, as we have at present with the record levels of red tape that exist."

According to the FPB's research, at £2.4 billion the amount spent by smaller businesses on employment law is the highest out of all seven different types of legislation categorised in the quarterly survey, called Referendum. It surpasses the £2.1 billion per year spent on health and safety administration and £1.8 billion on tax

The survey found that smaller business employers spend £259 million on work associated with dismissals and redundancy. They spend a further £391 million on absence control and management, £237 million on maternity, £333 million on disciplinary issues, and £1,175 million on holidays and any other remaining areas of employment legislation. The average time per month spent on all these different areas of employment law was found to be around 10 hours for each small business.

In all, 81% of businesses surveyed said the existing regulatory framework was unrealistic, not robust and unfair.

Particularly time-consuming were the tasks of understanding new regulations (73% thought this was excessive) and the general monitoring and administering of legal responsibilities (74%). Monitoring and administration was deemed to be most costly (45% felt the cost was excessive), closely followed by implementing health and safety legislation (selected by 42% of respondents).

 

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