Director Weekly A win for the IoD on business regulation

Amidst the continued stream of gloomy economic data – the latest showing that the UK economy shrank by 0.1% in January – there was good news for business this week with the launch of the government’s Better Regulation Action Plan

The Action Plan commits to a 25% cut in the administrative costs of regulation on business. That will be widely welcomed, given that the regulatory burden is consistently among the top four concerns identified by IoD members in our Policy Voice survey.

To achieve that goal, the government has pledged both to reduce the major regulators’ legal duties and to cut the total number of regulators. To start with, the Payment Systems Regulator is being abolished, with relevant duties taken over by the Financial Conduct Authority, while the Regulator for Community Interest Companies will be folded into Companies House. Ministers have been tasked with identifying further opportunities by the summer.

The launch of the Action Plan move follows the IoD’s recent Spending Review submission, where we called for the government to reinstate a Business Impact Target for new regulation over the life of the Parliament. We’re delighted that the government has listened to us with the measures unveiled in the Action Plan.

The challenge now will be turning ambitious goals into reality. Targets to reduce regulation are all too easily missed, as previous governments have found. Pressure for reform needs to be sustained throughout this Parliament – progress will take time to deliver.

Besides, there are still ways the government could go further. We would like to see more rigorous and timely impact assessment procedures when government is looking at new regulation, and non-regulatory solutions should always be considered. The business case for new regulation should be subject to proper independent scrutiny by the Regulatory Policy Committee, with a commitment to reviewing the ongoing effectiveness of existing regulation at regular intervals. The government should be equally ambitious about tackling the administrative burden of the tax system, too.

And the reality is that other policy decisions are adding to the economic headwinds facing employers in the here and now. The latest ONS Labour Market Data reflects weak hiring intentions – a result of both the looking employment rights reforms, and the National Insurance hike that kicks in from April. The benefits of the Better Regulation Action Plan will emerge over the course of years, not weeks – so the government will need to look elsewhere if it wants to give business a more immediate confidence boost.

But it is good to see the government listening to business. The Better Regulation Action Plan is an important step in the right direction. Now for delivery.

Read the IoD’s latest analysis of employers’ hiring intentions here.