February 28, 2012 1:25 pm

Business yet to feel benefit of red tape curbs

Business leaders have urged the coalition to go further in cutting red tape, including more deregulation of the labour market, after ministers claimed to have succeeded in capping the burden of new regulation.

The Department for Business said there would be a net reduction of more than £4m in regulatory burdens in the first half of this year, in a progress report on policies including the red tape challenge and “one-in, one-out”, whereby any new domestic regulation must be matched by scrapping old rules of at least equal cost.

Mark Prisk, business minister, told the Financial Times: “We have made good progress but there is still a lot more to do. You don’t change a regulatory habit of 30-40 years in 18 months.”

But the British Chambers of Commerce said ministers had a long way to go to honour their pledge to be the first administration to leave office having significantly reduced regulation.

John Longworth, director-general of the BCC, said: “Businesses tell us they are still not feeling the burden of regulation lifting. “Although doubling the unfair dismissal qualifying period to two years will boost business confidence to hire, more changes are needed to create a hard-hitting and comprehensive deregulatory package.”

That should include reforming redundancy rules, introducing no-fault dismissal and tribunal fees and sufficient action to implement promised health and safety changes, he said. He also urged reforms to mitigate the effect of the removal of the default retirement age.

Steve Radley, policy director at the EEF manufacturers’ organisation, said: “There are encouraging signs that the flow of new regulation is beginning to slow. However, we are still seeing relatively little progress in removing existing regulations. We need to move from the ‘work in progress’ of the red tape challenge proposals to outcomes that make a difference on the ground.”

He added: “Looking to the rest of this parliament, government must lift its ambitions and commit to a reduction in the total cost of regulation as felt by businesses.”

The department’s six-monthly statement said five new regulations costing business £12.27m a year would be introduced in January-June, more than offset by 19 deregulatory measures that would save £16.44m.

Mr Prisk said the biggest new cost was a £6.5m reform of the Air Travel Organisers’ Licensing scheme, which was supported by the travel trade.

Savings included £5.2m from abolishing contracting-out for defined contribution pension schemes and £4.7m from extending the qualifying period for unfair dismissal claims.

Mr Prisk said the government was also “gaining some traction” in curbing the flow of regulation from Brussels, with a commitment that micro-businesses will be excluded from future European Union legislation unless the measures are proportionate to them, and an exemption for 1.2m UK small businesses from some EU accounting rules.

The department said the overall burden of regulation had been cut by a cumulative £3.3bn since the beginning of last year, but that was achieved entirely by a switch from the retail price index to the consumer price index in uprating private sector pensions, which will be partly offset by introduction of auto-enrolment for pensions this autumn.

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