Government plans to cut the cost of red tape

11 August 2008

The government has launched proposals that will set budgetary ceilings on the amount of regulation that can be introduced by individual departments.

Under the plans, which are being described as a world first, a rolling budgetary limit will curtail the costs of new regulation, to take effect from next April. Government departments will be allowed to offset the cost of any new rules with savings made by reducing the existing regulatory burden and by trading with other departments.

John Hutton, the Secretary of State for Business, said: “Good regulation should drive competition and boost our productivity. But too many rules can stifle enterprise and blunt our competitive edge.

“If the UK is to remain a respected place to do business, we must not expect business simply to absorb the costs of a stream of new government initiatives.”

Mr Hutton added: “The introduction of a regulatory budget for every department will focus new regulations on the real priorities and act as a powerful incentive for departments to cut or streamline existing burdens. This innovative approach will build on efforts already in place to cut the burden to business by 25 per cent by 2010.”

Those budgets are to be agreed later this year, and departments are to be monitored through impact assessment reports that will require full explanations of the costs of any new regulation.

Given their complexity and urgency, only new climate change regulations are to sit outside the system of budgetary control.

Sally Low, director of policy at the British Chambers of Commerce, welcomed the announcement: “In the current economic climate proposals which aim to reduce the burden of regulation will help to ease many of the pressures on companies across the UK.”

The plans now go out to consultation.