Not bad Brown – but don’t put your feet up

The chancellor’s pre-election Budget set out to court those sectors of the electorate that he considered crucial to win over if the government is to be returned to power for a third time.

The elderly and those trying to get a foot on the housing ladder were singled out for special treatment, and Brown also made gestures towards acknowledging the burden of regulation of business. Given the conclusions of the Hampton review, he could hardly have done otherwise.

The number of inspection agencies will be cut and both the Better Regulation Task Force and Regulatory Impact Unit will be re-branded, the latter for the fourth time in nine years.

These are positive moves in themselves, though it will take more than superficial change to persuade businesses that the government has grasped the concerns of firms both large and small about the extent and impact of regulatory intrusion into the running businesses.

Using the government’s own figures, the British Chambers of Commerce have put the additional cost of new regulations introduced since 1997 at over £40bn. Of course, many of these new regulations derive from EU legislation. Yet our government has been identified as being among the worst offenders when it comes to ‘gold-plating’ minimum standards decreed by Brussels.

ACCA’s small business manifesto, launched in the same week as the Budget, has stressed that, despite the OECD’s recent finding that UK entrepreneurs enjoy a better business and regulatory environment than exists in many other countries, small firms are still over-burdened by regulation because they lack the resources and staff to deal with it. Red tape, and the cost of complying with it, is identified by small businesses as their leading concern.

The manifesto highlights a number of areas where fine political commitments can be converted into positive gain for small businesses.

Firstly, Regulatory Impact Assessments (RIA) must be improved. Ministers should ensure that the proposed regulations meet specific cost/benefit criteria.

Second, ‘sunset clauses’ should be incorporated into most new proposals, so measures lapse unless there is a conscious decision by ministers to re-introduce them. Third, small firms should be compensated for the additional costs they incur. This would remind government that placing additional responsibilities on businesses is not a cost-free option.

Over and above these specific points, it is crucial that cross-departmental priority is given to the impact of regulation on the SMEs. And on a wider level, the quality of service provided by those that carry out regulatory functions must be addressed. ACCA’s research found that in the second year of self-assessment less than 5% of firms felt the Revenue had dealt correctly with their clients’ tax returns.

One thing small firms do not need is having to spend even more time dealing with compliance than is absolutely necessary.

John Davies is head of business law at ACCA

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