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Select Committee on Public Accounts Thirty-Second Report

2 Delivering Reductions in Administrative Burdens

11. If all departments achieved their reduction targets, the aggregate potential saving would be approximately £4 billion. This represents an average saving per business of £2,000 per annum, although the amount each firm will save will vary.[23] The Better Regulation Executive believes that reducing administrative burdens will provide tangible benefits for businesses, contributing to higher profits, freeing up resources and, particularly for small businesses, freeing up people's time.[24]

12. In December 2007, the Better Regulation Executive announced that departments had delivered some 280 reductions and claimed that these had achieved cost savings worth £800 million for businesses.[25] The measures include a wide range of projects across the economy and the Better Regulation Executive believes that the measures include simple, pragmatic ideas to reduce costs.[26]

13. The real test of the Programme is, however, the extent to which it delivers meaningful impacts for businesses.[27] Experience in Denmark and the Netherlands shows that businesses have not noticed the full impact of changes.[28] In the United Kingdom, some observers consider that progress to date is limited. In 2007, a survey of its members by the Institute of Chartered Accountants of England and Wales reported that more chartered accountants believed that the regulatory environment had deteriorated rather than improved compared with the previous year.[29] The NAO survey of businesses in February 2007 showed that 60% considered regulation to be a key challenge and an obstacle to their success.[30] The relative importance of administrative burdens is, however, not known.[31] Studies in Sweden have shown that they are likely to be only a small part of the total cost of regulation, but the Better Regulation Executive felt that valuable improvement had been delivered, for example, in simplifying Health and Safety forms.[32]

14. The Programme aims to reduce those aspects of regulation that businesses find burdensome. Yet the NAO survey showed that, at the outset of the implementation phase, businesses did not believe that Government had a good understanding of their concerns. 67% responded that Government did not understand business well enough to regulate and 68% stated that Government does not consult well with business before changes to regulations are introduced.[33]

15. Departments and regulators are responsible for identifying proposed actions to reduce administrative burdens. They set out their work programme in Simplification Plans, which were first published in December 2006 and are being updated annually until 2010. HMRC has also drawn up an equivalent action plan.[34] The first round of plans drew heavily on initiatives that were already on-going when the measurement exercise started, but also concentrated on achieving reductions in the high cost areas.[35] For example:

BERR is focusing on its three areas of highest costs—company law, employment law and consumer law;[36]
Communities and Local Government has sought to simplify the planning system by introducing a new planning portal;[37] and
HMRC has undertaken a comprehensive review of the VAT system and worked with businesses to identify how to make changes.[38]

16. The NAO's 2007 survey also showed that the majority of respondents found all of the administrative tasks of complying with regulations burdensome. The two most important burdens were "having to keep up to date with changes in existing regulations" and "the length of time it takes to go through the process of compliance" (Figure 2). These results demonstrate the importance of improving the quality of the regulatory regime more broadly, and show that the most burdensome aspects of complying with regulations are not necessarily costly in monetary terms.[39]

17. Business rated the following activities as most important in reducing the burdens of regulation. They were to:

simplify complex rules;
improve access to information that spells out clearly which regulations apply; and
provide guidance that clearly sets out how to comply with a regulation.[40]

18. Departments' 2006 simplification plans report that they are addressing the wider aspects of regulations that businesses find burdensome, and are focusing on the activities that businesses consider the most important.[41]

Figure 2: Aspects of complying with regulation that businesses find burdensome

Do agree or disagree that the following administrative activities are a burden when complying with regulation?

Source: NAO/ Ipsos MORI survey of 2,000 businesses conducted in 2007

19. Small businesses are more likely to consider regulation as an obstacle to their success and administrative burdens are likely to be disproportionately higher for small businesses in relative terms.[42] Calculations of administrative burdens, except in the tax area, were carried out at an aggregate level and were not broken down between types of business.[43] HMRC adopted a different approach and considered the distribution of administrative burdens between different sizes of businesses.[44]

20. In March 2008, the Government published the Paper: Enterprise: unlocking the UK's talent. The Government committed to introducing a new approach to regulating small firms with its "think small first" policy. In the first instance, it will examine whether firms can be fully exempted from new regulatory requirements or be subject to simplification of enforcement. Where this is not possible, departments will seek to work with small firms to design specific approaches for them.[45]

21. Only one in ten businesses was aware of the Government's initiative to reduce burdens (Figure 3). Furthermore, 75% of businesses thought that the burden of regulation would increase, and 85% were not confident of the Government's ability to succeed in reducing burdens.[46] Communicating effectively with businesses, for example by notifying them of the aim of the Programme and the results that have been achieved, will be key to creating awareness and changing businesses' perception.[47]

Figure 3: Awareness of Government initiatives to reduce administrative burdens.

Are you aware of any of the following initiaitves by government to try and improve regualtion and reduce the current burdens on business?

Source: NAO /Ipsos MORI survey of 2,000 businesses conducted in 2007

22. Departments are responsible for communicating to stakeholders the results of their initiatives to reduce burdens.[48] There were, however, examples of changes made by departments of which businesses were not aware. For example, the online Human Resource tool developed by BERR is designed to help save businesses time and money but it is a challenge for the Department to raise awareness of its existence amongst those businesses that would benefit.[49]

23. The Better Regulation Executive has recognised that they face a challenge in communicating the results to businesses and is committed to making sure that people are aware about the changes. In December 2007, the Better Regulation Executive published a summary of all the reductions that departments had delivered, providing practical examples of change from all departments. The Better Regulation Executive has also instituted a system whereby departments issue all changes to business regulations twice a year, at points known as Common Commencement Dates. The Executive hopes to reach 1 million businesses through this route.[50]

24. One of BERR's 2008-11 PSA targets is to deliver the conditions for business success. As part of this commitment, the BERR has specified objectives and measures relating to better regulation. The indicators relevant to this Programme include: achieving the 25% administrative burden reduction target; and improving the proportion of people who believe that "most regulation is fair and proportionate".[51] The NAO survey showed that 46% of businesses agreed that regulation was fair and proportionate, and 39% disagreed. The Better Regulation Executive committed to improving business perceptions, as measured by this indicator, in 2008.[52]

25. Regulations can provide a number of benefits. By focusing on administrative burdens, the Better Regulation Executive sought to improve the regulatory environment without undermining the protections or benefits offered by regulation, such as helping to correct market failures, underpin competition and protect workers and consumers.[53] These protections are important. For example, health and safety regulation has yielded the best record on health and safety in Europe, as demonstrated by the number of fatalities at work falling from 1,000 a year in 1974 to 250 in 2006.[54]

23 Q 68 Back

24 Qq 29, 48, 73 Back

25 Ev 13 Back

26 Qq 5, 49 Back

27 Q 6 Back

28 Qq 5, 8 Back

29 Q77; Ev 16 Back

30 C&AG's Report, para 1.16 Back

31 C&AG's Report, para 14 Back

32 Q 6 Back

33 C&AG's Report, para 1.15 Back

34 C&AG's Report, paras 3.3-3.4 Back