Tax & admin · 12 October 2016

Small firms demand action to fight red tape costs as government misses target

red tape
The credibility of the government’s £10bn red tape target has been undermined

The government has been urged to do more to overcome the strain of red tape on small businesses, after a new report from the Committee of Public Accounts (PAC) accused policy makers of failing to deliver on their targets.

In its Better Regulation report, the influential public spending watchdog concluded that limited progress had been made towards meeting the target of reducing the cost of business regulation by £10bn before 2020.

So far just £1bn in savings have been achieved, which the report put down almost entirely to the mandatory 5p plastic bag charge – categorised as a “saving” for retailers by the government and which does not apply to smaller businesses in England.

Measures expected to increase costs for UK businesses have meanwhile been left out of government targets altogether. The demands of the National Living Wage, for example, are expected to cost businesses over £4bn over the next four years.

The PAC therefore claimed that by excluding these regulatory costs, which the report estimated will total £8.3bn, the credibility of the government’s red tape target was undermined.

In response to the report, the Federation of Small Business (FSB) national chairman Mike Cherry said that reducing red tape was increasingly crucial for small firms, and that the government’s future relations with business could hinge on how well it responds to the PAC’s findings.

Cherry said: “As the new government recalibrates its relationship with business, this agenda needs to be tackled if small business owners are to trust that government wants to make life easier.

“The government should act on this report so small businesses don’t feel so overwhelmed by regulation. It is concerning that many government departments don’t know the existing costs, the business secretary should press Cabinet colleagues, celebrating those departments that ‘think small first’, and naming and shaming those that don’t.”

Cherry added that ensuring productivity in the economy, from businesses of all sizes, would be especially important as Britain faces up to the implications and challenges of Brexit.

“We support the government’s drive to de-regulate, but we are not seeing the current full regulatory picture or evidence of changes on the ground,” he said.

Brexit for startups: Will it cut red tape or cut life support?

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Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.