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Why does the UK need regulation?
Regulation is necessary to protect the environment, workers, consumers, and other parts of society. But it is important to ensure that regulations do not become a burden on businesses or limit growth.
Is it true that regulation has cost UK businesses over £30 billion since 1997?
The real costs of administering new regulations are a fraction of this figure. What has increased are the benefits that people enjoy, like decent wages, paid holidays or time off to attend to family matters, through measures such as the National Minimum Wage and Working Time Regulations. Some people have confused these benefits with the small proportion of costs to business of administering such measures.
From 1 April 2004 firms with turnovers of £58,000 or less will not have to register for or pay VAT – the highest threshold in Europe. This will keep 5,000 of the smallest firms out of the VAT system.
How does regulation in the UK compare with other countries?
Overall, British business is doing well. ‘Entrepreneurs face a better business and regulatory environment in the UK than in most Organisation of Economic Co-operation and Development countries’(OECD October 2002). The Economist Intelligent Unit – APAX- study of business regimes in 60 different countries, published in 2002, assessed countries against a set of indicators including infrastructure, market potential, regulation, labour market and tax policies. It placed the Netherlands, Denmark and Britain in the top three places.
The World Bank report ‘Doing Business in 2004: Understanding Regulation’ named the UK among 10 countries – out of 130 countries – with the least regulation. Others include Australia, Denmark and the US.
The Organisation of Economic Co‑operation and Development (OECD) Economic Survey of the United Kingdom (published Tuesday 20th January 2004) said that ‘Competitive pressures appear to be relatively strong in the UK, with economic and administrative regulations inhibiting competition and barriers to trade amongst the lowest in the OECD’.
Does regulation make it difficult for the UK economy to compete with the US?
It is an over-simplification to say that the US is less regulated than the UK. Exemptions from federal legislation are often counteracted by state rules and by rules applying to employers with federal contracts. The Organisation of Economic Co-operation and Development (OECD) states that ‘contrary to popular belief, the United States does not appear to be, on the whole, less regulated than other OECD countries. It is however, often differently regulated than most other countries…’
Is it true that the Government introduces 4000 new regulations every year?
No, this confuses the number of Statutory Instruments (Sis) with the number of regulations on business. The number of Statutory Instruments introduced each year, which has ranged from 3,200 to just under 3,500 during the last decade. Over 95 per cent of SIs have little or no substantial impact on business. Around 40 per cent have only a local or temporary effect – Road Traffic Orders, for example.
A better measure of burdens imposed by regulation is the number of Regulatory Impact Assessments produced by departments for proposals that would have a significant impact on business. These are published by Departments.
Has regulation increased under the current Government? Since 1997 there has been no upward trend in the totals for Statutory Instruments or Acts of Parliament. Regulatory Impact Assessments (see above) tell the same story for numbers of regulations imposing a burden on business.
The Budget 2004 included a package of deregulatory reform measures, which will deliver significant benefits to business. For example, new regulatory proposals likely to impose a major new burden on business will require clearance from the Panel for Regulatory Accountability, chaired by the Prime Minister or the Chancellor; consulting on the implementation of phasing out payment via employers for Working Tax Credit
This package was welcomed by business:
Does regulation discourage small businesses?
More than one and a half million businesses have started up since 1997. There were an estimated 3.8 million business enterprises in the UK at the start of 2002, an increase of 51,000 (1.4 per cent) on the start of 2001. Overall there has been a net gain of 116,000 firms since this Government took office. Over 99 per cent of businesses are small or medium sized. In the 1990s, you needed twenty-eight separate licences, certificates and registrations to start a business. Now the figure is one form for many sole traders; and 5 forms for private companies.
Is the amount and rate of European legislation increasing year by year?
The most recent information on the Commission's legislative activity suggests that this is not true. This information can be found in the Report from the Commission ‘BETTER LAWMAKING 2003’ [PDF 380KB, 42 pages] in Annex 1 (page 31).