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State of the Nation

Can Businesses Ever Cut Their Way Through The Red Tape Tangle?

By October 25, 2013 No Comments
Can Businesses Ever Cut Their Way Through The Red Tape Tangle?

Small Business drowning in paperworkOn an average day, small business owners have a very long to-do list. And most of them are fairly unhappy when they find yet more has been added to their working burden. So it’s unsurprising that most SMEs aren’t too keen on regulation, less yet if it’s imposed by faraway European regulators. They would say that if red tape strangles business, the red tape from Europe threatens to throttle small enterprises completely.

Earlier this month, the Government’s Business Taskforce tackled this thorny issue in a report on the costs of EU red tape and how it might be cut. This group of the great and good from the private sector advises the Prime Minister David Cameron on matters concerning Britain’s companies, and it came up with some bold suggestions about how things might be made easier for smaller firms in particular.

First, the taskforce suggested that any proposed EU legislation should be scrutinised to make sure that it passes a number of tests. For example, will the proposed new law help or hinder competitiveness? Importantly, might a system of one-in, one-out be applied, where an existing regulation is ditched when a new one is introduced? Are new rules proportionate? Open Europe, a body that campaigns against too much EU meddling in national affairs, estimates that the 100 most expensive European regulations cost the UK more than £27 billion a year. A high price that falls particularly hard on smaller firms. The suggestion that Brussels bureaucracy can be excessive and unfriendly to business was echoed recently by none other than the European Commission president himself, Jose Manuel Barroso, who committed the EU to screen two-thirds of all European rules for their commercial fitness.

Recognising that SMEs are particularly hard hit by the time and money involved in keeping up with this legislative slog, the taskforce suggested that the smallest businesses should be exempted from any new employment law proposals. But many SMEs would say that coping with existing employment rules is headache enough. Just looking at some of the lengthy employment-related advice offered by business organisations, such as the Forum of Private Business, gives a flavour of just how much employers already have to contend with.

The taskforce went further and stated that a number of existing and proposed pieces of EU legislation should be scrapped altogether. The regulatory hurdles identified fall into five loose categories – overall competitiveness; starting a company and employing people; expanding a business; trading across borders; and innovation. Of the many rules criticised or proposed for reform, the following had particular relevance for SMEs:

  • Small businesses operating in low-risk sectors should no longer be compelled by the EU to keep written health and safety risk assessments.
  • Individual countries, not the EU, should have the flexibility to decide how traineeships for young people are provided.
  • There is a risk that proposals covering European countries sending employees temporarily to work in another EU country could involve mountains of paperwork.
  • Proposals on data protection could impose a disproportionate burden on small businesses. The UK Government reckons SMEs alone would face extra costs of anywhere between £80 million and £290 million a year.
  • A directive giving agency workers certain rights has reduced flexibility and threatens job creation.
  • Proposals for labelling food’s country of origin would be impractical and costly.
  • Businesses selling goods or services to customers in other EU countries face a nightmare in sorting out VAT, so the position shouldn’t be worsened by adding layers of complication.
  • EU rules say that companies – even very small ones – are meant to register the fact that they carry waste. This applies even if the amounts concerned are tiny and the waste carried is the company’s own.

Many of the taskforce’s ideas will seem eminently sensible and straightforward to those running businesses. Taking the example of carrying waste, is it really necessary for a self-employed gardener to register as a waste carrier if he or she is getting rid of a barrow-load of grass cuttings? But other regulations that might seem irksome or unnecessary to an individual company could, for a politician, represent a key plank in implementing an important social policy. Take proposed EU rules on pregnant workers, singled out for comment by the report. The European parliament is suggesting that employers should be obliged to give 20 weeks’ maternity leave on full pay. The report says: “If the European Parliament’s position were to be adopted, the UK would face extra costs of around £2.5 billion a year, while other European states would face a similarly high bill.”

Cost is one thing, but votes are another. For many of those in Brussels, allowing new mothers several months off work without losing money is a principle from which they won’t be budged. In other words, despite big wig recommendations of easing the bureaucratic burden and promises from those in authority to make laws more company-friendly, few business owners will be expecting the politicians to climb down soon.

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