Govt’s ‘red tape cuts’ end in net cost of £140m to businesses

12 October 2016

Ironically, it was the addition of a regulation, not the cutting of red tape, that made the vast majority of savings for businesses this year, according to a parliamentary select committee report. And cutting regulation has actually cost, rather than saved, money.

The Public Accounts Committee published a scathing review of the Conservative Party’s deregulatory drive this week, noting that of the £1.56bn the government states it has saved businesses on their regulatory costs, £1.02bn can be accounted for by the introduction of a regulation – the 5p plastic bag charge.

“While the Better Regulation Executive’s rules classify the plastic bag charge as a saving to business because it brings additional revenue to retailers, it is of course a regulation imposed on business, rather than the sort of deregulation that one would expect to be behind reported savings,” the Committee pointed out.

After subtracting the plastic bag charge and £0.68bn in new costs to business, this means the government has actually introduced a net additional cost to business of £140m.

What’s more, this ignores the expense to business of major new regulations which are not counted towards the target: “The National Living Wage is one of a number of individual regulations that are excluded and which, in total, are expected to add costs to business of £8.3 billion by the end of this Parliament, far outweighing the reported ‘savings’,” the Committee said.

This means the government is falling well behind its target of saving £10 billion in costs to businesses of regulation by 2020.

Perhaps this is because most of the deregulation pushed through since the Conservatives have been in power have had very negligible impact, with 64 of the 95 regulatory changes scrutinised by the Regulatory Policy Committee since parliament began expected to achieve less than £5 million in savings each.

Other astonishing criticisms of the government’s failed project included the fact that government departments don’t actually know how much of a cost regulation represents to business now, making calculations on savings impossible. Only five out of 14 departments have any plans to change this.

Departments are also supposed to conduct impact assessments to see how ‘red tape cuts’ affect consumers, workers and the environment but of 83 regulatory decisions for which these reports are now due, only two have been submitted.

What’s more, none of the impact assessments received by the National Audit Office included plans for post-implementation reviews, and only a third of those examined by the Regulatory Policy Committee in 2014 were “rigorous” in their analysis of wider costs and benefits to society.

“However, the [Regulatory Policy] Committee does not have the power to rate an impact assessment as unfit for purpose on the grounds of inadequate consideration of wider impacts,” the Public Accounts Committee noted.