Memorandum submitted by the Federation
of Small Businesses
The Federation of Small Businesses (FSB) welcomes
the opportunity to respond to the Regulatory Reform Committee
Inquiry into the Better Regulation Executive (BRE) and the impact
of the Better Regulation Agenda.
The Federation of Small Businesses is the UK's
leading non-party political lobbying group for UK small businesses
existing to promote and protect the interests of all who own and/or
manage their own businesses. With over 210,000 members, the FSB
is also the largest organisation representing small businesses
in the UK.
The FSB is supportive of the principles driving
the better regulation agenda and agree with the link between regulatory
burdens and its impact on business growth/costs. The FSB's own
research findings demonstrate that legislation is disproportionately
burdensome to micro businesses and is perceived as a serious barrier
to growth by them.
Anecdotal evidence from FSB members and recent
research indicates that both practically and perceptually the
Better Regulation Agenda has not delivered for small businesses
and many consider that Regulation will increase.
The FSB certainly welcome the BRE's five principles
for measuring and improving regulation and its enforcement; namely
proportionality, accountability, consistency, transparency and
targeting. However we would contend that the definitions of these
principles do not fully encompass a small business vision of "better
regulation". Small businesses of course accept the basic
definition of the five principles but have a special perspective
on how these principles would apply to their businesses in terms
of the particular challenges regulations pose for them. This could
go some way to explaining some of the differences between the
BRE strategy and the perception and experience of small businesses
which will be highlighted in our response.
The following table based on a report written
for the FSB by Professor Rob Baldwin of the LSE, explains the
differences in viewpoints.
|Principles||Small Business vision of good regulation
Summary of BRE principles
|Proportionality||Benefits are balanced against special costs to small businesses.
||Regulators should only intervene when necessary. Remedies should be appropriate to the risk posed and identified and minimised.
|Accountability||Small business influence is no less important than that of large business.
||Regulators must be able to justify decisions and be subject to public scrutiny.
|Small businesses competitiveness is not prejudiced by regulation; growth is not unfairly hindered; the cumulative effects of regulation are considered; positive assistance is provided with information and compliance.
||Government rules and standards must be joined up and implemented fairly.
|Transparency||Processes are open and user friendly within small business constraints.
||Regulators should be open and keep regulation simple and user- friendly.
|Regulatory policies take on board small businesses side effects and do not discourage entrepreneurial activity.
||Regulation should be open focused on the problem and minimise side effects.
The extent to which the Better Regulation Executive (BRE) has
developed a coherent strategy for implementing regulatory reform
The key consideration is how the strategy translates on a
practical level to small businesses. Recent evidence from FSB
into two of the policy areas identified as the most burdensome
for small businesses, health and safety and employment law, suggests
that the strategy would benefit from developing a more detailed
consideration of the special position of small businesses.
The FSB's employment survey published in October 2007 showed
that the business community is "deterred from creating employment
opportunities by the threat of legislation" with over a third
citing the complexity of employment legislation and the overall
burden of red tape as key factors.
The findings of the FSB's health and safety survey in June
2007 were even more emphatic, with 72% of businesses stating that
they found that health and safety administrative requirements
had become more bureaucratic. The volume of health and safety
legislation was also cited as a deterrent to businesses employing
These research documents are appended to this response and
clearly highlight that in terms of employment and health and safety
regulation, the better regulation agenda practically as well as
perceptually has not eased burdens for small businesses.
Perception is of course significant, and the BRE has stated
that it is a key measure of the success of their strategy.
Anecdotal evidence from FSB members suggest that few are
experiencing any easing of their current regulatory burden. The
perception is that any reduction in one area is simply replaced
by further regulation in other areas. This is backed up by the
NAO report into Reducing the Cost of Complying with Regulations,
which demonstrates that businesses lack confidence in the Government's
ability to succeed in reducing regulatory burdens on business
and deliver real benefits for business. They cite that 75% of
businesses consider that regulation will in fact increase.
Whether the BRE works effectively with other areas of government
to implement regulatory reform initiatives
Over and above the two regulatory areas mentioned, the research
conducted by the NAO backs up the FSB's own findings across the
board. The NAO recommends that Government departments need to
work more directly with businesses to understand their concerns.
Furthermore, they suggest that the BRE needs to do more across
departments to ensure consistent delivery of its objectives.
In conclusion, the FSB welcomes the BRE strategy and its
principles to improve the regulatory environment for the business
community. However, evidence to date demonstrates that there is
still some way to go as far as small businesses are concerned.
We consider that further work is required to change business
perception about the impact of the better regulation agenda and
to gain a greater understanding of business concerns.
The Government should ensure that it takes small
and micro businesses into account during the legislative process
and tailors legislation and associated guidance to their needs.
More needs to be done in terms of measuring and
improving the perception of regulatory changes among the small
business community. More frequent audits could provide a clearer
assessment of progress.
New legislation should specifically analyse the
potential impact and costs to small businesses and adapt proposed
"Better Regulation ... is it better for Business?" written
for the FSB by Professor Robert Baldwin. Back
Ibid pp 10-12. Back
Key Facts in Employment Law-FSB, 2007. Back
Whatever Happened To Common Sense-FSB, 2007. Back
http://www.publications.parliament.uk "Minutes of evidence
taken before the Regulatory Reform Committee". Back
National Audit Office, Reducing the Cost of Complying with Regulations:
The Delivery of the Administrative Burdens Reduction Programme