The cost of regulation - £ 150 billion

Cost of business regulation could exceed tax revenue

By Jonathan Moules of The Financial Times

The total cost of business regulations to the UK economy could be greater than the money raised by income tax, according to the head of the government's Better Regulation Task Force Sir David Arculus, who chairs the taskforce, is currently consulting with business, the public sector and charities to calculate the cost of administering new legislation, as a first stage to cutting the administrative burden of red tape.

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He has also called for views on improving regulations, receiving about 4,000 responses so far: only a tiny proportion of the 4m companies in the UK. That may reflect cynicism about the ability of any government taskforce to make a difference. It certainly does not reflect a general mood of contentment in business about the burden of red tape.

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Sir David confirmed to the the Financial Times that he expects his final estimate for the cost of regulation to be between 10 and 12 per cent of UK gross domestic product, or £150bn, more than the 10.9 per cent of GDP collected in income tax.

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About two-thirds of the regulatory cost reflected rules with "desirable outcomes", such as clean water, clean air, waste recycling and "prudential" financial controls, Sir David added."Bad regulation" is the one-third spent on administration, according to Sir David, and this will be the focus for cutting red tape.

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Sir David notes that his red tape burden estimate is in line with the Netherlands, which went through a similar exercise and calculated that 3.6 per cent of its GDP is spent on regulatory administration. The Dutch government's plan to cut this red tape burden by 25 per cent over four years is one that Sir David hopes to replicate in the UK.

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In March, Sir David won government support for his plan to adopt the Dutch model, as well as encouraging a "one in, one out" approach to new regulation. For many business people, Sir David's goal of making existing regulations "better" is inadequate: they believe that government should instead be cutting the absolute number of laws being put onto the statute book.

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He defends his actions by stressing that his role is not to undermine democracy, where politicians are elected on a mandate to pass laws."Governments get elected with various policy promises," Sir David said. "People voted for these measures, but nobody votes for bureaucracy and administration costs.

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"Another charge is that Sir David is merely overseeing the creation of more bureaucracy in the name of cutting red tape. His team of about 80 civil servants at the taskforce will undertake the detailed work of measuring red tape across government, and will spend the next nine months assessing the true extent of the regulatory burden. But he argues that change is already occurring across government to reduce unnecessary waste, noting that the bonuses for senior civil servants at government departments are already linked to their ability to cut administration costs.

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At present, 94 per cent of new legislation is subject to impact assessments. Laws that do not have assessments are often those introduced through national emergencies - such as the highly controversial money laundering legislation. In these cases, Sir David would like to see sunset clauses introduced so that legislators can consider the cost of their actions.

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More generally, he wants to persuade the government to improve the quality of the drafting of law, "so that there is no wiggle room when legislation is passed". He would rather that ministers got it right first time, instead of seeking to correct problems once the legislation is implemented.

One of his greatest concerns is the European Union, the source of about 40 to 50 per cent of UK regulations, Sir David said.