Keeping tabs on the sticky issue of red tape

Expect a good deal more discussion about red tape as the election — and a further round of European legislation — approaches.

This week the government faced its first showdown with business on the subject as employers’ organisations prepare to make the issue one of their key campaigning points. Clearly, the CBI and the BCC want a halt to more regulations and are anxious to influence Labour’s manifesto.

But red tape is a tricky subject to debate. We have heard it all before. From business, constant reference to the dangers of regulation can sound like a repetitive whinge. From the government, repeated promises to cut the burden can sound hollow — especially when there has been considerable implementation of European legislation over the past few years.

Red tape is often blamed for stifling enterprise and competitiveness as business holds up the US as a shining example of all that is loosely regulated and highly productive. But the highly regulated and highly productive economies of Germany and France fly in the face of this argument.

It may be too easy to blame business shortcomings on regulation. As the government faces calls for less regulation, it should be borne in mind that no capitalist country in the world is deregulating. Even the freeing up of markets to competition generates a raft of regulations, such as the regulatory offices set up to watch privatised utilities. Regulation is both a feature of wealthy economies and of increasingly sophisticated markets. As countries become wealthier, so their populations demand better standards and more protection.

And as markets and products develop, regulations covering matters such as safety and the environment have to keep pace.

Of course, regulation hits small and medium-sized businesses hardest. The BCC points, for example, to rules covering a small hotel/restaurant which stretch to 1,500 pages. Clearly it is difficult for small busy firms to keep on top of such demands and still run the business effectively.

However, it is also difficult for the government to excuse small companies from the basic business standards demanded of the rest of the economy.

There are ways in which the government can help minimise the effect of business legislation, such as through the Small Business Service and by allowing sufficient time for consultation over new laws and their implementation.

One of the key complaints has been about hurried and poorly drafted legislation. There are poor regulations, such as the climate change levy which business faces. But the way to tackle the regulation debate is to discuss individual policies.

Such an approach is both more relevant and targeted, and strips away the rather hackneyed red tape tag.