Gearing up for a red-tape revolution

By Anna McLauchlin

Date: 30/06/05

Governments and their administrations frequently declare their desire to cut red tape. Few of them, however, are any good at achieving this objective.

But cutting red tape to reduce the burden on businesses will be one of the main priorities for the UK presidency. The British government believes that this is an initiative that could make a real economic difference to Europe. John Hutton, the UK minister in charge of regulation, estimates that the potential savings for the EU run to hundreds of billions of euros.

"Figures from the US and the Netherlands tell us that 10%-12% of GDP (gross domestic product) is spent on implementing policy and around 3.6% of this is spent on the administrative burden alone," says David Arculus, who heads the UK's Better Regulation Task Force (BRTF). The BRTF was set up eight years ago to help the UK government tackle the burden on business of implementing policy.

"Now think about how long the government spends on working out how to spend income tax, which raises about 10.9% of GDP. And yet the policy burden isn't calculated at all."

For Europe the UK has two main goals: improving regulatory assessment and consultation for new legislation, and simplifying existing regulations.

Arculus thinks that impact assessments (IAs) should be carried out within the European Commission but overseen by a separate body. And he recommends a 'one in, one out approach', where no legislation can be adopted unless an outdated or unnecessary one is scrapped.

Mark Courtney, deputy director of the UK's Better Regulation Executive, which was created in May to oversee the government's own war on red tape, thinks that consultation is one of the most important areas to work on.

"It's difficult because you have to consult with 25 member states and analyse the results, but we need more and better consultation," he says. "It's not a popularity contest, it's meant to show how important legislation can affect stakeholders."

Members of the UK's Department of Trade and Industry said that they were particularly concerned about the pitfalls of internet consultation.

In a recent online consultation, asking EU citizens whether they would support an EU-wide tax on cars based on CO2 emissions, 72.8% of respondents were from Portugal.

Another of Europe's biggest needs, Arculus says, is a quicker legal mechanism for simplification. Even when Brussels has decided where it wants to trim things down, it has to go down the traditional route through Parliament and national governments before anything can be done.

In his view, the stakes are high. "Europe needs to choose whether it wants to stand alone, trading between its members, or whether it wants to be part of the global economy," he says. "If it's the latter then it has to have a more flexible regulatory system."

The BTRF will submit a paper with recommendations on consultation at a UK presidency conference on better regulation to be held in Edinburgh on 22 September.

It has already submitted one paper to the Commission, in December 2004, on simplifying existing laws, entitled Make it Simple, Make it Better. A final paper on alternatives to legislation will be presented in December 2005.

Slashing the legislative burden on business is not a new idea for Europe. In 2002 the Commission launched a 'Better Regulation Plan' and in 2003, an interinstitutional agreement committed MEPs and national governments to create a fast-track approval method for simplified legislation.

The Enterprise and Industry Commissioner Günter Verheugen has taken steps to re-energise the initiative, under the slogan "improving the business environment". In March 2005 the Commission adopted a communication promising to focus on impact assessment and aims to encourage member states to follow suit. Its simplification work programme for 2006-07 will be published in October.

But progress has been slow, and both the Dutch and British governments estimate that EU regulation still costs their businesses more than €7 billion every year.

The Netherlands' own red tape revolution, which aims to cut the administrative burden on companies by 25% by 2007, sparked joint backing for EU regulatory reform from the six states holding successive presidencies of the EU from January 2004 to December 2006: Ireland, the Netherlands, Luxembourg, the UK, Austria and Finland.

Under the first three presidencies, ministers identified a shortlist of laws that could be simplified but it will be under the UK's leadership that the issue will intensify.

At the national level, the government has already matched words with deeds. On 24 May the UK Finance Minister Gordon Brown launched an action plan based on BTRF recommendations. The government will cut the number of annual inspections by one-third and the amount of form-filling by a quarter. All government departments are currently studying where they can cut out rules and will submit plans in 2006.

And the government has already taken steps to reduce other burden on business, such as exempting nearly 900,000 smaller companies from audit requirements on their accounts and stripping out a requirement for small businesses to register or pay value-added tax (VAT).

"We're simply saying this is working in our country, why don't you have a go at it?" says Arculus.

Article takes a look at the priority of the UK Presidency of the European Union to abolish unnecessary regulation.