Have Government promises to cut red tape made regulatory life any easier for small firms? Roland Gribben investigates.

Red tape in the form of excessive or burdensome regulation continues to be a growing headache for small businesses. Surveys regularly pinpoint the issue as one of the principal obstacles in the way of developing a more profitable business, but the Government insists its efforts either to control or roll back the regulatory frontiers are making life easier.

There is certainly evidence of a more rigorous approach to the introduction of new legislation or additional regulation in the shape of closer scrutiny of the merits and need for new controls, but to the small business community the production line of more paperwork for government appears undiminished.

The British Chambers of Commerce, in evidence hotly disputed by the Government, claims that regulations introduced since Labour took office in 1997 have cost business more than £30bn. New employment legislation, regulations covering discrimination in the workplace, working-tax credits, stakeholder pensions, flexible working rules and the increasing demands of the Health & Safety Executive are among the measures contributing to the huge bill, according to the Chambers of Commerce's 'Burdens Barometer'.

There are other figures. The Better Regulation Task Force feels US estimates that regulation accounts for about 10 per cent of gross domestic product with compliance adding another 2.5 per cent are comparable to the cost in the UK. "With regulation absorbing such large sums we all need to be sure we are getting value for money and monitor the impact on productivity and competitiveness," says task-force head David Arculus.

The Engineering Employers' Federation, in a report analysing the performance of UK manufacturers against their French and German counterparts, highlights red-tape and the way it is applied in the UK as one of the problem areas frustrating efforts to make the UK a more competitive and productive nation. While acknowledging that legislation in the UK is less onerous than across the Channel, the EEF argues that UK companies have more difficulties in coping, particularly with EU rules, often because of cultural differences.

Continental companies, it points out, are able to adapt more quickly to changes in employment law, for example, because of their structure and the greater social element in their operations. UK companies on the other hand have been "used to operating in a different way that has not required them to implement the administrative systems and models of social partnerships possessed by companies on the continent".

The social and cultural divide is only one of the issues raised in any examination or debate on the regulatory regime. Local authorities and central government may argue that they are applying a light touch in the way they are introducing fresh regulatory measures, but the change in the composition of the end product and the starting point presents a considerable headache.

Between 40-50 per cent of new business regulations landing on the desks of UK companies now carry a Brussels postmark. The weight of EU directives, regulations and guidance notes is threatening to swamp business in-trays and involve companies spending more time and devoting more resources to implementing them.

The quantity and quality of EU red tape produces headaches for Whitehall as well as the business community. The Government insists it is firmly committed to operating business-friendly policies that involve a lighter regulatory touch. Chancellor Gordon Brown has made commitments to hacking into the paper jungle while the Department of Trade & Industry says it is attempting to make life easier for business through a reorganisation of its aid and assistance schemes as well as requests for information from companies.

But is Brussels making it more difficult to roll back the regulatory frontiers? The issue produces the inevitable political friction and while civil servants may attempt to make EU jargon more tolerable and understandable, the end result is that small businesses have to spend more time juggling with a bigger paper mountain than they do chasing customers and new business. Typically small manufacturing businesses say they are now employing as many staff to administer their business and keep regulators happy as they do people to make their products.

The Better Regulation Task Force, an independent agency charged with shaping the elusive level playing field between government and business by fulfilling the role of something like a referee, has been particularly critical of the EU approach to regulation.

In its last annual report the Task Force urged Brussels to be more vigorous in its examination of proposed new laws before embarking down the legislative route. It wants to see EU authorities carrying out more detailed studies to assess the impact of regulatory change before rushing to introduce new measures. The Blair Government has embraced the principle of regulatory impact assessment and now carries them out on significant policy initiatives, but the Brussels machine operates them in only a limited fashion. The collection of EU-wide data produces considerable problems but the Task Force argues that it makes more sense to avoid damage to business rather than count the cost afterwards.

There is an inevitable degree of guesswork in producing an assessment that takes a stab at economic assumptions. The Task Force feels the wider application of such studies has helped the British process and resulted in less harm to business but has reservations about the quality of the work that has gone into some of them.

It is regularly referring a number of them to the National Audit Office for review on the grounds that they are inadequate. The agency was particularly critical of the Home Office for failing to carry out any assessment of the costs and benefits of the plans for identity cards.

The Task Force has also challenged the Government to be more proactive in its approach to regulation by adopting a 'one in, one out policy' that, in essence, means scrapping one legal measure when a new piece of legislation reaches the statute book. At the same time it also wants to see Whitehall learning lessons from American and Dutch civil servants in their efforts to reduce paperwork and administrative burdens on business.

The 'wish list' is extensive, but small businesses in particular feel more attention should be applied to the operation of existing legislation as well as the introduction of new measures. Dealing with the taxman, whether in the shape of the Inland Revenue or VAT, remains the biggest bugbear along with increasingly complex operational rules.

But employment law and the growing raft of health and safety regulations are adding considerable burdens. The Health & Safety Executive has become one of the most productive government agencies in terms of adding to the load of paperwork and influencing the basic operations of business with its increasing demands. The broad view among business organisations is that the balance between the commonsense application of safety rules and regulation has been damaged by the excessive demands of the agency.

From essential rules on the operation of machinery to advising companies to protect employees against stress and stressful working conditions, the Executive is increasingly influencing the way a business operates. The Executive feels it is fulfilling its mandate to produce a safe environment and health workforce but many companies feel it is exceeding its remit and needs to have its wings clipped.

Government studies suggest that while there are complaints about regulation and red tape, most small business owners are vague about the biggest burdens until it came to discussing health and safety and employment protection issues. Minimum wage and working time rules on the other hand appear to have caused few problems.

Ministers and Whitehall will remain under pressure to make the 'light' regulatory touch even lighter, but with regulators growing more powerful and consumer as well as employee protection and social issues becoming a higher priority for administrators, there is unlikely to be little let-up on the regulatory battlefield.

Biography

Roland Gribben joined the Daily Telegraph in Manchester in 1963 and moved to London three years later, initially covering labour relations. As Business Editor of the newspaper he has reported on the major industrial and commercial events of five decades as well as the growth of new enterprises.