Policy paper

2010 to 2015 government policy: business regulation

Updated 8 May 2015

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

This is a copy of a document that stated a policy of the 2010 to 2015 Conservative and Liberal Democrat coalition government. The previous URL of this page was https://www.gov.uk/government/policies/reducing-the-impact-of-regulation-on-business. Current policies can be found at the GOV.UK policies list.

Issue

Some regulations are ineffective and unnecessary. Complying with them costs businesses time and money, and can restrict growth. Red tape can also make running charities and community groups more difficult than it needs to be.

The government wants to ensure all regulations are fair and effective. We want to strike the right balance between protecting people’s rights, health and safety and freeing them from unnecessary bureaucracy.

Actions

To ensure regulations in the UK are fair and effective, we are:

• controlling the number of new regulations by operating a ‘one in, two out’ rule for business regulation
• assessing the impact of each regulation
• reviewing the effectiveness of government regulations
• reducing regulation for small businesses
• improving enforcement of government regulations
• using alternatives to regulation
• reducing the cost of EU regulation on UK business

We publish guidance for all government policymakers to help design better regulations or find other options instead of regulation.

Have your say on how we enforce regulations.

Tell us which regulations you think should be removed or improved.

Background

Over the years, regulations - and the inspections and bureaucracy that go with them - have piled up. Businesses say the amount of new regulation is one of their biggest problems, preventing them from growing.

In the coalition agreement, published in 2010, we said that we would:

• cut red tape for businesses and individuals
• not rely on rules and regulations by themselves to get things done

Who we’re consulting with

We’re running a series of reviews called ‘Focus on enforcement’ to get businesses’ views on how we could improve the way we enforce regulations.

We’ve launched Business Focus on Enforcement, giving trade associations and business groups the chance to bid to conduct reviews.

We’re also running the Red Tape Challenge, asking businesses and the public which regulations they think could be removed or improved.

Appendix 1: reviewing the effectiveness of government regulations

This was a supporting detail page of the main policy document.

Ineffective regulations

Effective, well-designed regulation plays a vital role in protecting consumers, businesses, employees and the environment.

But many regulations are unnecessary, overcomplicated or out of date. These regulations waste time and money, and damage economic growth.

Unnecessary regulations also harm our society. For example, people don’t want to volunteer in their community if they have to comply with overly complicated regulations.

In many cases alternatives to regulation are more effective, such as simplifying existing regulation, giving clearer information to consumers or developing voluntary codes of practice.

We are committed to getting rid of ineffective regulation that places unnecessary burdens on business and the public.

Getting rid of ineffective regulations

We are working to get rid of ineffective regulations by running a Red Tape Challenge:

• asking businesses and the public to tell us which regulations should be improved or abolished
• assuming that regulation should go, unless there is a strong justification for it to stay
• where regulation stays, we are finding ways to reduce burdens in its implementation
• on 10 September 2012 the government committed to abolish or substantially reduce at least 3,000 of the 6,500 regulations being examined by the programme

We are including ‘review’ and ‘sunset’ clauses in regulations to make sure they are reviewed regularly.

Well-designed regulations can protect consumers, employees and the environment.

But a number of the regulations introduced in the past are now out of date or no longer have the desired effect.

Forcing businesses to comply with unnecessary regulations wastes their time and money and damages our economy.

Unnecessary regulations also harm our society. For example, people don’t volunteer in their community if they have to comply with overly complicated regulations.

Dealing with unnecessary regulations

To deal with unnecessary and ineffective regulations, we are:

• running the Red Tape Challenge to ask people which regulations should be improved or abolished
• including ‘review’ and ‘sunset’ clauses in regulations to ensure they are reviewed regularly

Review and sunset clauses

A review clause asks whether a regulation:

• is still required
• is effective
• has caused any unexpected costs for organisations
• has resulted in the intended benefits

Sunset clauses put a lifespan on legislation: the regulation expires automatically after seven years, unless the government renews it.

For more details, see the Better Regulation Framework Manual.

See also: Clarifying the Relationship Between Policy Evaluation, Post-Legislative Scrutiny and Post-Implementation Review

Appendix 2: using alternatives to regulation

This was a supporting detail page of the main policy document.

The government always considers different ways of bringing about change – with regulation as a last resort.

No new intervention

In many cases, it might not be necessary for us to do anything at all. Regulation and its alternatives will usually bring costs as well as generate benefits, so policymakers should think carefully about whether we need to do anything.

Instead of creating new regulations, we could:

• use existing regulation
• simplify or clarify existing regulation
• improve enforcement of existing regulation
• make legal remedies more accessible or cheaper
• do nothing at all

Information and education

Instead of regulation, information and education can help consumers make informed decisions. For example:

• independent recommendation schemes such as Which? magazine in the consumer products and services industry
• ratings systems such as Trip Advisor in the hospitality and leisure industry
• labelling such as front of pack nutritional red/amber/green food labelling in the food retail industry
• disclosure of information such as government food hygiene rating stickers on restaurant doors

Self-regulation

An industry or profession might adopt its own code of practice promoting ethical conduct, such as:

• unilateral codes of conduct such as retailers adopting a returns policy that is more generous than the statutory minimum
• unilateral sector codes, such as the Portman Group code of practice which promotes the responsible marketing of alcohol amongst producers of alcoholic drinks
• negotiated codes, such as the chemical industry’s ‘responsible care’ programme

Co-regulation

Co-regulation is similar to self-regulation but government is involved. For example, an industry might work with us to develop a code of practice. The code is usually enforced by the industry itself, or a professional organisation, rather than the government. There are several types of co-regulation codes:

• recognised codes, such as professional codes for doctors via the General Medical Council
• statutory codes, such as the Acas Statutory Code of Practice on Discipline and Grievance for employers, employees and their representatives across the UK economy
• approved Codes of Practice, such as the Health and Safety Executives code on Commercial diving projects offshore
• trade association codes (approved by the Office of Fair Trading), for example the the car repair and servicing industry
• standards and accreditation such as the international standard (ISO 14001) that specifies a process for controlling and improving an organisation’s environmental performance

Economic instruments

We can use economic instruments to change people’s behaviour, and can adjust the financial incentives facing businesses and citizens. People can make their own decisions, considering whether the benefits of an action justify the costs.

We can affect behaviour by changing:

• taxes and subsidies, such as Research and Development Relief for Corporation Tax
• quotas and permits, such as the European Union trading scheme for carbon dioxide emissions from electricity generation and the main energy-intensive industries
• auctions such as the British third-generation mobile phone license auction in May 2000
• every day competition by businesses from all industries

When to use regulation

We see conventional regulation as a last resort. We will use regulation when:

• we cannot achieve our goals by self-regulation or other methods
• analysis of the costs and benefits shows regulation is preferable to self-regulation or other methods

There are more details on our approach to regulation in the coalition’s principles of regulation. See the Better Regulation Framework Manual.

Appendix 3: assessing the impact of new regulation

This was a supporting detail page of the main policy document.

Introducing new regulation is expensive for the government and for business. To keep this cost down, there’s a rule that any policymaker who wants to bring in a new regulation has to look at:

• the potential effects of the regulation
• alternatives such as a change to an existing regulation or an information campaign to educate the public

To make sure policymakers do this, they have to carry out an impact assessment (IA). It’s a formal process, where policymakers have to prove they’ve done their research into the likely effects of the proposed regulations – good and bad. They also need to demonstrate that a new regulation is the best option.

We publish all impact assessments so anyone can read them at www.legislation.gov.uk.

Why we publish impact assessments

We publish impact assessments so that the public and businesses can see:

• why the government is proposing to take a particular action
• how new policies may affect them
• the estimated costs and benefits of the policy or action

It’s also an opportunity to identify unwanted outcomes of the proposed regulation.

Scrutiny

Impact assessments are checked by the Regulatory Policy Committee (RPC), an independent body. The Committee decides whether an impact assessment has been carried out correctly and is credible.

The final stage is for policymakers to send impact assessments to the Reducing Regulation Committee (RRC) for review. The RRC, a cabinet sub-committee of ministers, decides whether the case for a new regulation has been made - and either approves or rejects the proposal.

Recent changes have been agreed by the RRC to the requirements for impact assessment and RPC scrutiny. Interim guidance has been published and a full update to IA guidance will be issued shortly.

Guidance

To help government departments produce an impact assessment, we provide the following guidance:

• Better Regulation Framework Manual
• Impact Assessment Calculator
• Impact Assessment Summary - overview of the process
• Checklist for Analysis on EU Proposals
• all assessments need to be published in a standard Impact Assessment Template to make it easier for scrutiny; using a standard template ensures the data can be uploaded into a central impact assessment library and used for data analysis
• User Manual for the Impact Assessment Template
• where fast track submissions are being submitted to the Regulatory Policy Committee, the standard Regulatory Triage Assessment Template should be used.

To handle queries on impact assessments, each government department has an expert team in their Better Regulation Unit.

If you have a query on impact assessments, contact the Better Regulation Team at the Department for Business, Innovation and Skills on BetterRegulationTeam@bis.gsi.gov.uk

Appendix 4: operating a ‘one in, two out’ rule for business regulation

This was a supporting detail page of the main policy document.

Businesses say 1 of their biggest problems is the number of new regulations they have to comply with. It costs them time and money.

To reduce the number of new regulations for businesses, the government operates a ‘one-in, two-out’ rule. This prevents government policymakers from creating new regulations that increase costs for business and voluntary organisations.

When policymakers do need to introduce a new regulation, and where there is a cost to complying with that regulation, they have to remove or modify an existing regulation with double the cost to business.

Scope of ‘one-in, two-out’

The ‘one-in, two-out’ rule applies to UK regulation. It does not apply to:

• taxes
• regulation for civil emergencies
• some EU legislation
• regulation that has no impact on business

For a full explanation, see the ‘Better Regulation Framework Manual’.

Is ‘one-in, two-out’ working?

‘One-in, two-out’ builds on a ‘one-in, one-out’ rule that applied from January 2011 to December 2012. Over this period, government departments not only met the target but exceeded it, removing around £963 million more in business burdens than they introduced. This figure is based on independent validation by the Regulatory Policy Committee. The ‘one in, two out’ target requires an even stronger performance from departments.

Twice a year we publish a list of:

• new business regulations that will come into force in the next 6 months
• existing regulations that will end in the next 6 months
• an account of how departments are performing against their targets

See all published ‘statements of new regulation’ in the One-in, two-out: statement of new regulation collection page.

Fixed dates for new legislation

To help businesses plan ahead, we’ve set 2 dates during the year when new business legislation comes into force:

• 6 April
• 1 October

These are known as common commencement dates (CCD). The government aims to publish a list of new regulation before these dates, giving businesses advance notice of legislation that affects them.

Assessing the impact of a regulation

When a government department wants to introduce a new regulation or relax existing regulations, its policymakers have to consider the possible effects. They carry out a formal impact assessment.

Appendix 5: reducing regulation for small businesses

This was a supporting detail page of the main policy document.

Compared with large companies, small businesses usually have far fewer resources to help them comply with the government’s rules and regulations. As a result, compliance is relatively more expensive.

The government wants to minimise the burden that new regulations impose on small businesses, especially on companies with fewer than 10 employees (micro-businesses).

Micro-business moratorium

On 1 April 2011 we introduced a 3-year freeze on new UK regulation for businesses with fewer than 10 employees, including start-up businesses.

Known as the micro-business moratorium, the freeze applies to business regulations that came into force before 31 March 2014. There are some exceptions. See the Better Regulation Framework Manual.

EU legislation

Since January 2012 the European Commission has been seeking to adapt new business laws to make them less costly for small businesses. See the EU web page: Minimizing regulatory burden for SMEs for more details.

Appendix 6: improving enforcement of government regulations

This was a supporting detail page of the main policy document.

We want business to lead the economic recovery. So we need to remove all unnecessary burdens on business, making sure regulators continue to provide important protections.

We know that poorly thought-out regulations cost businesses time and money. So we are identifying and reducing these through the Red Tape Challenge. Sometimes the regulation is not the problem. Inconsistent or inappropriate enforcement causes problems, or could just work better.

Asking businesses their views

In March 2012, we launched the Focus on Enforcement (FoE) scheme. It consists of a series of sector-based reviews on whether national and local regulatory enforcement is placing the least amount of necessary burden on businesses. We published 10 reviews, together with regulator action plans proposing reforms in response, covering:

• small businesses in food manufacturing
• chemicals
• volunteer events
• coastal investments and projects
• care homes
• regulator appeals processes
• fire safety
• childcare
• pubs
• pharmaceuticals

As a result of these reviews, government is taking action to improve regulation enforcement.

Industry and regulators have welcomed these reforms. In March 2014, we launched Business Focus on Enforcement. This pilot scheme gives trade associations and representative business groups the dominant role in identifying enforcement issues, rather than civil servants. This will encourage reform to benefit their industries. The initiative also provides the opportunity to present findings directly to ministers and regulators.

We invited applications from trade associations and other representative business groups to lead reviews. They looked at how regulation enforcement, by national regulators and local authorities, affected their area or sector.

We received 14 applications. The winning bids were from:

• the Fresh Produce Consortium (FPC)
• the National Farmers’ Union (NFU)
• techUK

These organisations made the best case for:

• why a particular area needs review
• how they would carry out the review in an effective, inclusive and impartial way

They also made a successful case for government part-funding to support the work.

Appendix 7: reducing the cost of EU regulation on UK business

This was a supporting detail page of the main policy document.

The government wants to stop unnecessary costs being imposed on UK business by EU regulations.

We particularly want to reduce paperwork for small businesses so they can grow and help boost the economy.

EU Business Taskforce

In June 2013, the Prime Minister invited a taskforce of 6 business leaders to look at reforms to European rules, regulations and practices that would make the most impact on British businesses. The taskforce sought contributions from businesses across the EU.

Their report, ‘Cut EU red tape’, recommended 30 reforms to individual EU rules to remove competitiveness barriers. It also proposed the COMPETE principles, a common-sense filter for all new EU regulation, to ensure it is pro-innovation and pro-growth. These principles are:

• competitiveness test
• one-in, one-out
• measure impacts
• proportionate rules
• exemptions and lighter regimes
• target for burden reduction
• evaluate and enforce

The government welcomed the taskforce’s report and agreed to take forward their recommendations.

The update report, ‘Cut EU red tape: 1 year on’, shows that we have already achieved 10 of the 30 recommendations and have made good progress on a number of others. There is also growing support for the COMPETE principles among major European business organisations, the European Parliament and the Commission’s own better regulation advisory group (the Stoiber group). And, in December 2014, the EU Competitiveness Council supported a range of key COMPETE principles, this was subsequently endorsed by the European Council later that month.

Reducing the cost of EU regulation

We are working closely with the EU to reduce the cost of regulation. We particularly want the European Commission to concentrate on the areas that businesses find most burdensome and that matter most for growth.

The Commission is running a regulatory fitness (‘REFIT’) programme to review EU legislation. The REFIT plan includes more than 100 actions to reduce EU regulatory burdens and a further 56 actions are awaiting confirmation by the new Commission.

The UK supports the REFIT programme, which includes 5 of the taskforce recommendations and has led to the repeals and withdrawal of legislation which would have cost UK businesses hundreds of millions of pounds.

We are pressing the Commission to be even more ambitious and for further and faster action.

Small businesses

Small businesses are disproportionately affected by regulation. According to the Commission, complying with regulations can cost a small business 10 times as much per employee as it costs a large company.

Since 2011 the Commission has committed to adapt new business laws to make them less costly for small businesses and to offer exemptions for micro business with fewer than 10 employees.

We have backed its efforts, but continue to call for further action as the Commission only reports on selected higher-profile proposals at present. Our own analysis suggests that there were over 60 adaptations of some kind for small and micro businesses in Commission proposals between the beginning of 2012 and the end of October 2014.

We are pressing the Commission for more examples of action that greatly lowers costs for the smallest businesses.

We would also like to see more done to address those rules identified by small businesses as the ‘top 10’ most burdensome pieces of EU legislation. We continue to work to ensure these improvements are included in ongoing negotiations.

UK influence in the EU

The government aims to influence EU legislation by getting involved early in the policy making process. This commitment is set out in the government’s ‘Guiding principles for EU legislation’.

Ending ‘gold-plating’

The ‘Guiding principles for EU legislation’ set out how the government has stopped the so-called ‘gold-plating’ of EU rules. This means we will not exceed the minimum requirements of European directives when we write them into UK law, unless this is clearly in the UK interest. Ending gold-plating will mean British businesses are no longer at a disadvantage compared to their European competitors.

For more details, see the ‘Transposition guidance’ on implementing EU Directives into UK law.