Out-Law News 2 min. read

Government £3bn regulation saving challenged by business group


The cost of complying with company regulations has been reduced by more than £3 billion this year, the Government has claimed. But a business group has claimed that the Government has imposed new regulatory costs on companies.

The Department for Business, Innovation and Skills said in its Statement of New Regulation that its 'one-in, one-out' policy, which means that any new regulation which imposes a net cost on businesses must be offset by a reduction in costs elsewhere, will lead to a reduction in net costs to businesses of £3.27bn.

The cost reduction was mainly brought about by changing the index used to link public sector pensions to inflation, the Government said.

Each Government department has also published a summary of the regulatory changes it plans to introduce before the end of the year along with the report.

However, business representatives the British Chambers of Commerce (BCC) expressed concern that new regulations were still being passed which increased the financial burden on businesses.

"This statement shows that ministers have failed to stem the flow of new regulation. No Government, anywhere, should impose £45 million in new costs on businesses in the midst of a bumpy recovery and uncertain global economic climate," said BCC director of policy and external affairs Dr Adam Marshall in a statement.

The Government has not acknowledged the effects of regulations imposed by Europe in its calculations, Marshall said.

The BCC has spoken out against the impact the Agency Workers Directive (AWD) will have on businesses that rely on temporary workers. The AWD will give those workers who have been employed in the same place for 12 weeks the same rights to "basic working and employment conditions", such as pay and holidays, when it comes into force in the UK on 1 October 2011.

"The Government has already admitted that AWD will cost British business over £1.5bn each year, far more than any of the tiny regulations they are removing today," Marshall said.

The Government has been allowing the public to scrutinise over 21,000 active regulations in an exercise it calls the 'Red Tape Challenge', which began in April this year.

Once each area of the law has been considered, ministers will have three months to work out which regulations should be kept and why. "The default presumption will be that burdensome regulations will go," the Red Tape Challenge website said.

The Government said that although new regulations had been passed this year, the costs to businesses in complying with them has been offset by the reduction in costs from the regulations that have been removed.

More than three times more measures that remove or reduce regulation have been introduced in the last six months compared to the first half of the year, from eight up to 25 according to Government figures.

Simpler laws that will be introduced before the end of the year include easier patent inspection, reducing the burden on companies when they update information on the public record and modernising the regulation of credit unions, the Government said.

Next month the Government will propose new rules to reduce financial reporting requirements for small businesses. It is also proposing to introduce new laws next year to exempt subsidiary companies from having an audit where the parent company is prepared to guarantee its debts.

The first Statement of New Regulation was published in April and set out the Government's plans to reduce the costs to business of complying with domestic regulations.

"During 2011 we have made real progress in cutting the costs of red tape for businesses. People are beginning to realise that regulation must be the last resort, not the first option. There is much more to do - especially so that businesses really notice the difference - but this first year is very promising," said Business and Enterprise Minister Mark Prisk in a statement.

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