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Regulation system needs ‘wholesale review’

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A business group has renewed its call for the next government to tackle the burden that over-regulation imposes on businesses.

The Institute of Directors (IoD) has urged a culture change in government, saying that Whitehall departments need to give businesses the freedom to operate.

The cost to business of complying with government regulation is running at £80 billion a year, the IoD has claimed.

For that figure to come down, there needs to be a wholesale review of civil service incentives and job evaluation because too many government departments regard success as getting as many regulations onto the statute book as possible, regardless of the cost, the IoD argued.

The government has estimated that the actual compliance cost is closer to £13 billion annually, but the IoD employed a different set of calculations.

Taking the quantified hours that company directors and their staff spend each day handling regulation compliance, the IoD then costed that time using remuneration data.

As a result, the business group said that the real cost of business regulation is £80 billion a year or the equivalent of 5.7 per cent UK GDP.

The figure takes into account the hours spent form filling, reading guidance, taking advice and performing other administrative duties associated with regulation, but does not include the cost to firms of having to adapt their behaviour to comply with the rules.

According to the IoD, directors are having to invest 13 hours a month on administering regulations.

Business workforces as a whole spend 73 hours a month on regulation and administration, which equates to one member of staff working continuously for five and a half months to complete a business’s annual compliance requirements.

Miles Templeman, the IoD’s director general, commented: “£80 billion is effectively being taken out of the UK economy each year due to excessive regulatory paperwork. When the regulatory burden is so large that it typically occupies one employee in every private enterprise in the UK for nearly half a year, it’s obvious we have a problem.”

Mr Templeman continued: “This isn’t a debate about diluting protections, because form filling doesn’t protect anyone. This is about getting a culture change in Whitehall. Officials are incentivised to produce legislation.

“Unless the next government changes the way civil servants are evaluated and rewarded, businesses will continue to face a large and ever increasing burden of paper work that hinders them from growing and, ultimately, creating jobs.”