Friday, August 10, 2012
RED TAPE AND SMALL BUSINESS
In a wide ranging assault on the destructive nature of red-tape in the economy, he suggested that many of the regulations were nonsensical and overly-bureaucratic, such as requiring a £35 poisons licence to sell toilet descaler or ant killer and needing an alcohol licence to sell chocolate liqueurs.
He also noted that there were barriers to getting businesses off the ground and creating jobs. For example, whilst opening a new warehouse in Germany took only four months, he claimed that the delay in Britain could be as long as 18 months, thus disincentivising potential investors.
Whilst some in government circles dismissed his comments, they will not be a surprise to many businesspeople and lobbying groups. Recent surveys from the Federation of Small Businesses (FSB) have suggested that small firms spend as much as two days per week dealing with compliance and legislation, whilst a report from the British Chambers of Commerce concluded that the perception of many small firms was that they were being increasingly choked by government regulation.
The result, of course, is that this burden of excessive red tape can often affect the potential job creating ability of many firms, with entrepreneurs spending a disproportionate amount of their time dealing with paperwork rather then creating wealth and employment in the economy by seeking new customers, developing new products or services and growing their business. With politicians looking to kick start the economy, it is surprising that reducing and streamlining the regulatory process is not as much of a priority as it could be.
To be fair to the UK Government, it has begun to address this issue although many will argue that the process is still taking too long and is not filtering through to other levels of government, especially at a local and regional level.
That is why, as I argued last week, there are lessons to be learnt from the way in which the fifty state legislatures in the USA are looking to support their regional economies. Whilst they have developed specific programmes to boost the levels of entrepreneurial activity, they are also looking to find ways of reducing the amount of paperwork that local businesses have to undertake, with a significant number of US governors introducing legislation that are focused on reducing the burden on local business.
Of course, the legislative and taxation powers of the Welsh Government are somewhat different to what is found within individual states in the USA but it must be remembered that Cardiff Bay did gain extra powers in a number of areas last year, powers which those of us who supported the Yes campaign were hopeful could be used to create a more vibrant Welsh economy.
Yet, nearly eighteen months on, there is little indication that any new legislation will be introduced soon that will have any significant effect on the Welsh economy or will be used to boost the competitiveness of Welsh business. Compare this situation with the examples highlighted in the “Growing State Economies” report, where individual states are rushing out new pro-business laws to help their local business communities.
For example, North Carolina has completed a statewide examination of its regulations, getting rid of nine hundred rules that were deemed unnecessary or expensive. Similarly, Colorado has begun a rigorous review to identify unnecessary regulation and eliminate red tape in the near future.
In New Jersey, a law was recently passed requiring state legislators to consider the economic impact of new regulations. They would have to ensure that rules that exceed national standards would be prohibited, thus ensuring that local businesses were in no way disadvantaged by local regulation.
I am sure that businesspeople across Wales will be envious of such developments and would be delighted if our policymakers undertook similar exercises to not only identify where regulations could be reduced, but also to determine whether these are currently negatively affecting small businesses.
Of course, the Welsh Government has indicated that it will have a comprehensive legislative programme over the next four years in various areas. But whilst new laws on organ donations and mental health may be worthy, it is equally important, at this time more than ever, that these new additional powers are used to help create a more competitive environment for the Welsh business community.
It is surprising that business groups such as the CBI, IOD and FSB have not been pressing for a detailed review to be undertaken to examine where unnecessary regulation can be cut back within the Welsh Government and other public bodies.
But this shouldn't have to be an exercise for external lobbying groups alone, especially as politicians are so keen to call small firms 'the backbone of the economy' at any available opportunity. Given this, shouldn't at least one Assembly Member, with unanimous cross-party support, prioritise the introduction of a bill that would help reduce the legislative burden on tens of thousands of small businesses and help them move from pushing paper to creating jobs?
At the very least, it would demonstrate that our elected representatives in Cardiff Bay, regardless of political affiliations, can work together to help the Welsh economy and get people back to work within a small business sector that wants to create jobs if it was allowed to do so.