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Excerpt
from Chapter Three
of April 2004 Budget
Reforming
and reducing regulation
3.52
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Effective
and well-focused regulation can play a vital role
in correcting market failures, promoting fairness
and competition and driving up standards. However,
unnecessary or poorly implemented regulation can
be an obstacle to flexibility, restricting employment
growth and competitiveness, particularly for smaller
firms, without actually improving regulatory outcomes.
The Government is committed to delivering targeted
deregulatory changes to relieve burdens on business
as well as strengthening policy-making processes
at UK and EU level to improve the quality of regulation. |
3.53
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Payment
via employers has helped reinforce the principle
that tax credits are a reward for work, reducing
the stigma associated with claiming. Tax credits
are now firmly established as the fair approach
to providing financial support to working families.
Further, at the end of January 2004, six million
families were benefiting from the new tax credits
exceeding the Government’s ambitious expectations.
The Government accepts the case, in principle,
that the benefits to business justify moving to
direct payment of the Working Tax Credit, reducing
the cost of payroll administration and addressing
a key area of business concern. The reform will
be particularly valuable to the 1.2 million small
businesses that stand to benefit. The Government
will consult with employers on the detail of implementation.
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3.54
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Significant
and lasting improvements in the regulatory environment
for business will only be delivered through the
continuous improvement in policy-making at both
UK and EU level. The Government has already strengthened
its approach to reducing the overall regulatory
burden on business, improving the quality of regulations,
and enhancing regulatory stability. For the first
time, Government departments are this year reporting
on their regulatory performance – and the
independent Better Regulation Task Force (BRTF)
will publish its own analysis of these reports.
Departments’ regulatory performance will
be taken into account in the 2004 Spending Review.
The Government has also accepted all the recommendations
in a recent BRTF report (1)
and is now promoting the use of alternatives to
regulation across Whitehall and the wider public
sector. |
3.55
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Building
on this, the Government is introducing further
changes to ensure that reducing the flow and improving
the quality of regulation at UK level is a central
part of the policy-making process. In future,
any regulatory proposal likely to impose a major
new burden on business will require clearance
from the Panel for Regulatory Accountability,
chaired by the Prime Minister, based on a thorough
impact assessment of the proposal agreed by the
Cabinet Office Regulatory Impact Unit, before
the proposal is put to wider Ministerial approval.
The Panel will consider all such proposals in
the context of Departments’ previous regulatory
performance and the overall burden of regulation
across key business sectors. Where appropriate
emergency legislation will be exempt from these
new processes, and the new requirements will not
change the long-standing arrangements through
which tax matters are considered by the Chancellor
in the course of normal Budget processes. |
| 3.56 |
Around
half of all new regulation with a significant
impact on UK businesses originates in EU law.
Further reform is therefore essential at the European
level. In January 2004, the Chancellor and the
Finance Ministers of Ireland, the Netherlands
and Luxembourg set out proposals for regulatory
reform. These proposals include improved tests
to ensure that new legislative proposals do not
damage the European economy, clear commitments
to reduce the burden of existing EU legislation,
and greater use of alternatives to regulation.
EU Finance Ministers have supported these proposals
and called for a clear programme of action covering
the next two years. The Government will press
for agreement on this at the Spring European Council.
Further, the Government is submitting to the European
Commission a list of priority areas for regulatory
simplification, reflecting those suggested by
business in the recent BRTF consultation. |
| 3.57 |
The
enforcement activity of regulatory bodies is a
significant driver of business compliance costs.
As the BRTF recognised in their 2003 report Independent
regulators(2) well targeted
inspection programmes are vital, not only to deliver
the outcomes society demands, but also to minimise
the costs borne by compliant firms. Regulators
understand these challenges and some are making
progress. Enforcement strategy is a theme of a
document recently published by the Health and
Safety Executive,(3)
and the Environment Agency’s consultation
Delivering for the Environment. Building
on this work, the Government has asked Philip
Hampton, former finance director of LloydsTSB,
BT and British Gas, to consider, with business,
regulators, and in consultation with the BRTF,
the scope for promoting more efficient approaches
to regulatory inspection and enforcement while
continuing to deliver excellent regulatory outcomes.
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| 3.58 |
In
Budget 2003 the Government committed to making
changes to employment regulation on only two dates
each year, unless European obligations require
otherwise. This approach, providing greater certainty
about changes to the regulatory environment, has
been welcomed by business. The Government will
consult formally with businesses next month on
the feasibility of extending common commencement
dates to other areas of regulation and tax. In
parallel, the Department for Environment, Food
and Rural Affairs will study the feasibility of
extending the approach to environmental regulation.
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| 3.59 |
Alongside
the strengthened central scrutiny of new regulatory
proposals outlined above, Government Departments
will continue to engage directly with businesses
to tackle unnecessary regulations across key sectors.
The sectoral reviews announced in Budget 2003
are progressing well: • for the construction,
chemicals and retail sectors, the Government will
establish new industry/cross-government forums
on policy and regulatory development, to give
early warning of, and allow industry to express
its views on, emerging policy and regulatory proposals;
and • following concerns expressed by the
construction industry on unreasonable delays in
payment, the Government will review the operation
of the adjudication and payment provisions in
the Housing Grants, Construction and Regeneration
Act 1996 to identify what improvement can be made.
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| 3.60 |
The
two-year review of the Financial Services and
Markets Act 2000 proposes making it easier for
Citizens Advice Bureaux and similar organisations
to advise their clients without being subject
to Financial Services Authority regulation. Similar
steps are proposed in relation to employers advising
employees on pensions. |
Footnote
| 1 |
Imaginative
thinking for better regulation, Better Regulation
Task Force. To read more about this report, click
here |
| 2 |
Independent
Regulators.To read more about this report, click
here |
| 3 |
Strategy
for 2010 and Beyond |
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