Red tape bonfire of the vanities – Clarke on small business

Slash, burn, sweep away. Sharp blades, bonfires and new brooms.

When it comes to small businesses and red tape, politicians have a limited, but suitably strident vocabulary.

Nightclub bouncer Ken Clarke has the talk, but does he have the trousers?

Words that always play well to businesses large and small. Words that always play well politically.

Words that always play well to the vanity of politicians who believe their administration will have a light touch: less government, not more.

The problem is, for decades, Labour and the Tories alike have failed miserably to do anything about the legislative burden on UK SMEs.

They’re all talk and no trousers – words, words and more words.

So will Ken Clarke and the next Conservative government hold true to the pledge he made yesterday at the party’s 2009 annual conference that:

to get Britain back in business, the excessive regulation that businesses face has to be swept away.

Words like these echo down the years.

In 1994 Michael Heseltine famously announced the biggest purge of bureaucracy since World War II (?) and said he had lit a match under the :

… largest bonfire of controls that has taken place in modern times in this country.

In 2006 Tony Blair promised to cut red tape for business by 25% by May 2010, introduced the concept of ‘better regulation’ and Labour committed itself to:

… one of the most radical programmes of regulatory reform in the world.

The Cost of Red Tape

There is little doubt that the cost of red tape since Labour came to power in 1997 has increased dramatically.

Government figures suggest Whitehall bureaucracy costs businesses £15 billion a year.

The Federation of Small Businesses says SMEs spend 7 hours a week dealing with red tape. The British Chambers of Commerce (BCC) estimate new regulations introduced from 1998-2009 have cost business £76.8 billion.

Over 50% of the increase in costs accounted for by the BCC are linked to introduction of the National Minimum Wage, The Working Time Directive and the Data Protection Act.

Some would argue that introducing 4 weeks holiday for all, protecting personal data and setting a benchmark for low pay are all positive pieces of legislation.

But the uncertainty, cost and time it takes small businesses to deal with an ever-changing, growing legislative environment remains a massive headache.

In December 2008 the government claimed to have reduced the cost of red tape by £1.9 billion.

Bizarrely £400 million of this saving is supposed to have come via rather rudimentary ‘online tools’ to help businesses better understand their employment law responsibilities. A saving no business group I’ve spoken to finds credible.

Clarke’s Red Tape Proposals

So what will Ken Clarke actually do to address the red tape burden?

The headline grabbing ‘night club bouncer’ analogy – one in, one out in terms of new legislation – suits Ken down to the ground.

But one in, one out is not a ‘sweeping away’ of red tape, although it promises a 5% net reduction in the legislative burden set out in a policy document released yesterday – interestingly retaining the New Labour mantra of ‘better regulation’.

The challenge will be to prove significant reductions, not just near status quo ‘improvements’.

For years small business groups and some politicians like Vince Cable of the Liberal Democrats have called for sunset clauses on legislation i.e. legislation disappears from the statute books after a set period of time.

Conservative proposals have avoided this step. They did, however, introduce a sunset clause for quangos, unless they can prove their usefulness.

Since much of the legislation affecting small firms is derived from Europe, the pro-Europe Ken Clarke may find the reality of wielding his new broom more difficult to execute in practice, than in theory.

Most important, however, is what’s been missing from government or shadow-government red tape policy for over a decade – the concept of deregulation.

Deregulation – A Dirty Word

The fact of the matter is that ‘deregulation’ has become a tainted word. Why? Because deregulation of financial markets played a significant part in the massive global financial mess we all find ourselves in.

But small businesses shouldn’t be punished for the crimes of big business.

We need deregulation, not the status quo and certainly not ‘better regulation’.

Alex is the founder and editor of SmallBizPod, the UK's first podcast dedicated to small business, start-ups and entrepreneurship. Alex writes about topical small business issues, entrepreneurs and anything else that catches his eye here on the small business blog. http://www.smallbizpod.co.uk