Deregulation: One step forward, one step back
Monday saw the implementation of the second Common Commencement Date for new regulations affecting businesses for 2012. Changes that came into force will likely receive a lukewarm reception from business. By far the most notable change coming in will be pensions auto-enrolment, with a £2.8bn cost to business. However, this threatens to overshadow the recent progress made by the government in alleviating the burden of red tape.
Last week saw the implementation of the second Common Commencement Date for new regulations affecting businesses for 2012. Changes that came into force will likely receive a lukewarm reception from business, with companies seeing some welcome changes - changes to CRB checks and audit requirements - and some less than popular measures - such as cost recovery by the Health and Safety Executive (HSE). By far the most notable change will be pensions auto-enrolment, with a £2.8bn cost to business. The changes to pensions are part of a broader discussion around the challenges of a changing demographic in the UK, as opposed to forming part of the analysis into the government’s deregulation policies.
The government recognises the burden that unnecessary, or badly designed, red tape places on companies and the effect that this can have on growth, innovation and job creation. The government has made some tangible progress in this agenda in recent months, with some welcome reductions to the bureaucracy faced by firms. Notably, the recent announcements on changes to the health and safety regime for companies - particularly the changes surrounding ‘strict liability’ and the reductions in inspections - announced last month were welcomed by businesses.
However, this relief was short lived. New health and safety regulations came into force on 1 October placing a duty on the HSE to recover its costs for carrying out its regulatory functions from those found to be in material breach of health and safety legislation. At present, the cost for this is £124 an hour. The Chamber accepts that a cost recovery principle will provide a deterrent to those who otherwise fail to meet their obligations, and provide a level playing field for those who do. However, it is as if the government is taking one step forward and immediately taking one step back. This change risks damaging relationships between good, law-abiding companies and the HSE.
We are concerned that the new regime could effectively incentivise health and safety inspectors to find businesses in material breach of regulations. Under this new regulation, the focus of health and safety inspectors could shift from helping honest companies, to making money for the HSE – especially given the apparent 35% overall spending cut which the HSE needs to make. Given the current economic climate, even hypothetical excess costs are enough to give real cause for concern in the business community. This ultimately filters through to business confidence, which is already fragile enough.
For businesses on the ground, this change will likely feel like a step backwards in Whitehall’s attempts to reduce the burden of red tape. Given the government’s recent progress, and the new Business Minister’s attitude towards red tape, this will only fuel businesses frustration with the government. The government must continue in its efforts to lessen unnecessary regulations affecting companies, particularly those without a dedicated HR or legal department to deal with red tape. Moreover, we must also ensure that future legislation that affects companies is proportionate and does not distract companies from growing and creating jobs.