EU red tape tying business up in knots

By Anna McLauchlin

Date: 28/10/04

BEMOANING the burden of EU law on business has become popular as politicians are under pressure to make their economies more competitive. But what is the actual burden and how should it be calculated? The Dutch government is trying to get agreement on this issue as part of the overall drive for 'better regulation' in the EU.

Government leaders at next week's European Council will announce their conclusions on 4-5 November before competitiveness ministers take a look at the whole issue of regulatory burden on 25 November.

According to the Dutch government, 43% of national legislation can be traced back to EU regulation, costing its businesses an annual euro7 billion. Hence the Dutch drive to slash EU red tape. The British government found that 57% of major bills over the past five years implemented EU directives at a total cost of €37.8bn (€7.5bn annually) to UK businesses. This is the cost of complying with legislative requirements, which can range from providing information on company actions to supplying information to consumers.

But not all studies come to the same conclusions. A few years ago, Swedish researchers found that EU law had at most an impact on 8% of national laws, while at the beginning of this month researchers commissioned by Dutch Justice Minister Piet Hein Donner arrived at 16%. In response to the latter finding, Europe Minister Atzo Nikolaï said that he stuck to the original figures and has asked for new research to prove his point.

EU ministers last week (21 October) agreed that a common calculation for quantifying the burden of EU legislation for companies is essential to slim down future legislation.

The Dutch presidency is pushing its own model to achieve its target of slashing the burden for companies by 25% by 2007.

This model, previously applied in some sectors in Sweden, Belgium and Denmark, calculates burden as the amount of time taken to perform an administrative task multiplied by an hourly rate. These figures form a base cost measurement for existing legislation and help guide future legislation.

"We believe our method is the best available to [quantify} this type of burden," said an advisor at Actal, a group advising the Dutch government.

Although EU ministers agreed to allow work on a common calculation method, sources say many member states expressed concern about imposing a one-size-fits-all evaluation to all policy areas. Some have concerns over costs. Calculating the administrative burden for existing legislation has cost the Dutch government an estimated €5 million.

"Some ministers think the cost should be proportional to the administrative burden itself," said one EU official. Another suggested that the matter does not enjoy wide support. "Once [Gerrit] Zalm is no longer the president of the Council I think we might see interest in this issue dropping," he said.

The European Commission will publish a communication on the issue by the end of the year before launching 'pilot projects' to see how the system will work.

The calculation method is likely to be widened. But the Commission does not foresee "any systematic measuring of every single piece of community legislation".

"We will look at selective, proportionate use," an official said.

Article reports on an initiative by the Dutch EU Presidency to cut the administrative burden for companies created by EU legislation. It was stressed that a common calculation for quantifying the impact of EU legislation was essential for the undertaking.