Regulatory Reform Committee Inquiry

 

The Better Regulation Executive and the Impact of the Better Regulation Agenda

 

Response from the Federation of Small Businesses

March 2008

 

 

 

Introduction

 

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.[1]

 

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.

 

Small business vision of 'better regulation'

 

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[2].

 

 

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.

Consistency

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.

Targeting

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.[3]

 

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 more people[4].

 

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[5].

 

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.[6]

 

 

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.

 

Conclusion and recommendations

 

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.

 

Recommendations

 

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 regulation accordingly.

 

 

 

 

 

 



[1] 'Better Regulation ... is it better for Business?' written for the FSB by Professor Robert Baldwin

[2] Ibid pp 10 -12

[3] Key Facts in Employment Law - FSB, 2007

[4] Whatever Happened To Common Sense - FSB, 2007

[5] http://www.publications.parliament.uk 'Minutes of evidence taken before the Regulatory Reform Committee'

[6] National Audit Office, Reducing the Cost of Complying with Regulations: The Delivery of the Administrative Burdens Reduction Programme 2007