As the government vies for the attention of small businesses with its tax cuts and bail-outs, we’re left to wonder if anything’s really changing. But amid the madness, GB came across a red-tape-cutting drive that’s actually working
It’s not easy to make an article on red tape sound appealing. Or, as William Sargent, the UK’s leading authority on the subject, puts it: “This is nuts and bolts stuff; it’s not sexy or exciting.” But thrilling or not, it’s something that plagues many of you, coming up time and time again when you’re asked to name the biggest constraint to growth. A recent survey by the Federation of Small Businesses (FSB) found that the smallest employers are actually deterred from taking on staff because of the amount of box-ticking that goes with it.
But help is at hand. In 2005, Sargent became chair of the Better Regulation Executive (BRE), an organisation set up to ease the regulatory burden on businesses. The BRE gave itself a target of cutting the cost of compliance with regulation by 25% by May 2010. It recently announced that it’s now saving businesses £1.9bn a year in time and money spent on admin – nearly 60% of this target – with 18 months to go.
Part of this success is down to heavy involvement from the business community. Sargent is a successful entrepreneur himself. In 1986, he and his wife co-founded the Oscar-winning Framestore CFC. It’s now the largest visual effects studio in Europe and recently released its first feature-length animation, TheTale of Despereaux, an instant box-office hit.
With his unique position on both sides of the fence, Sargent has made some tangible changes and encountered several myths surrounding the subject. We caught up
with him to find out what progress has really been made.
The plan
Sargent’s approach to regulatory reform has been businesslike. “We began working out how we would make the regulatory infrastructure better, simpler and less expensive,” he recalls. In 2006, he asked PriceWaterhouseCoopers to measure every law affecting businesses (some 1,400), their separate requirements (around 20,000) and the reasoning behind them. The total administrative burden on business was calculated at £13.2bn, and the BRE agreed that 25% (£3.4bn) could be stripped. “When you’re running a business, you sit down and think: ‘Why do I do that bit and does that really add any value?’ That’s exactly how we’ve gone about this agenda,” he explains.
The aim was to make regulation smarter, providing essential protections while not stifling growth, thus helping to create a better business environment. They agreed on five principles of good regulation, which should be transparent, accountable, proportionate, consistent and targeted. There has also been a focus on improving regulation for small firms, making sure laws only apply where risks justify it and taking into account their limited capacity to comply with complex laws.
The first big change was to make every government department responsible for streamlining its own area of the law, by producing a yearly simplification plan. Each was given its own individual target of cutting red tape by 25%. “During the year, they sit down and ask themselves what they’re doing to strip out cost, to make the ability to comply less complex and to take out things that are winding people up, but not achieving anything,” explains Sargent.
What this created was a mindset change pivotal to the long-term success of the agenda. “Previously they were focused on how to bring in new initiatives,” Sargent says. And, by having a business brain behind the BRE, cohesion and logic untypical of a government initiative has ensued. “We say: ‘Those guys over there have got a pretty neat idea, why don’t you apply it over here?’” he reveals.
Fear factor
One of the most interesting discoveries Sargent has made is that a lack of awareness of their obligations is often leading businesses to over-comply. He believes this is one of the reasons why red tape is perceived as such a bind. “Businesses are doing something way beyond what they need to do, because they think that’s what the law’s expecting of them,” he says. “For example, people often over-do health and safety, because they’re afraid, and no one has previously made it easy for them.”
To try to combat this, the Health and Safety Executive has now taken 33 niche sectors, including hairdressing and convenience stores, and put downloadable information on its website detailing what these businesses need to do to abide by the law – nothing more, nothing less. “The law tends to be pretty straightforward, it’s just that small businesses find it difficult to get information,” Sargent adds.
Because of this, he also found that red tape is often being used as a cover for other things, which only perpetuates the myths doing the rounds. “I’ll give you an example of a story that really wound me up,” says Sargent. “The dean of some cathedral cancelled the 300-year-old pancake race on health and safety grounds, when in fact he just didn’t want to pay his staff overtime. People cancel the fireworks for health and safety reasons when they just don’t want to spend £50,000 on the display.”
There are now less than half the number of health and safety laws, and 75% fewer workplace deaths, than there were 30 years ago, he continues emphatically. “Health and safety is a particularly good set of laws that are normally common sense,” he says. “But because of all the scare stories, you end up with this perception, which is wrong.”
Getting buy-in
Involving businesses in the agenda has been crucial to its success. “It’s about the fifth attempt over more than 30 years to get a handle on this, but there’s a big difference this time in that everyone’s aligned,” Sargent assures. The simplification plans are “drawn up in conjunction with businesses” and run by them before they’re published to make sure the numbers add up.
This partnership was cemented by the creation of an online portal (www.betterregulation.gov.uk) where entrepreneurs can list their red-tape grievances. But Sargent doesn’t have time for general comments, or those that offer no solution. “If you’ve got a problem, tell me about it. But don’t tell me employment law’s hard work. Tell me about this particular form, or that you don’t understand the logic of something, and that there must be a better way of doing it.”
One of his biggest frustrations is with business owners who complain about the system, yet do nothing to try to improve it. “You can’t just blame civil servants and ministers for getting it wrong, because frankly, they don’t run businesses, so how will they know the impact?” says Sargent. “I don’t think the business community takes that responsibility seriously enough.”
The BRE responds within 90 days, whether they plan to take an idea forward or not – so far about half have been adopted. Sargent believes transparency is another important part of the initiative’s success. “Because the response is public, you can imagine the department at a very senior level takes an interest,” he says. As a permanent secretary, Sargent reports directly to the prime minister himself.
The announcement of the £1.9bn annual savings already achieved in December marked the publication of the third set of simplification plans, which list 240 measures the government is now taking to make regulation simpler for businesses.
We’re always naturally cynical of government initiatives. But with an entrepreneur behind it, this one actually appears to be working.
Key changes
– Electronic communication with shareholders. Airport security specialists Smith Detection saved £100,000 in printing and mailing costs on its 2007 Annual Report compared with 2006.
– Providing simple online guidance and downloadable forms on employment law, available on the Business Link website, saving businesses more than £400 million a year
– Health and safety example risk assessments – easy to follow examples of how to manage risks in the workplace and complete a “good enough” assessment
– Private companies no longer have to hold Annual General Meetings
– Simplified dispute resolution process
– Improvements to payroll accounting for small firms
– Removal of 54% of health and safety forms
– Safer Food Better Business – a pack and a simple record keeping diary aimed at helping small food caterers and retailers comply with food safety management procedures.
– A single national and electronically accessible application planning form for all local authorities.
– No longer need time-consuming inspections for your building work from local authorities
– Online tax returns and simplified tools for tax calculation