Should SMEs welcome one-in, one-out regulation?

What is the idea?

The initiative will mean, at its core, that before a new regulation is considered, another separate and existing regulation of “equivalent value” must be identified and proposed for removal.

Further, any such new legislation is to undergo scrutiny by a panel of experts (Regulatory Panel of Experts or RPC) prior to introduction.

What we therefore have is a policy aimed at making new regulation harder to introduce, forcing the legislator first to seek alternative solutions to the problems sought to be resolved. The philosophy behind the policy is to relieve businesses, especially SMEs, from the burden of red tape which stifles business growth in the UK economy.

The good news?

First, this new measure is to apply to all UK legislation (except EU regulations).

Second, the RPC will consider new regulatory proposals and give ministers an independent view on the justification for change and its likely impact. 

If it works, it means a focus on regulation only as needed and with a better sense of what it can really deliver as a benefit.

The bad news?

First, the idea is pretty vague. 

Second, the RPC is dominated by consumer and trade union interests – fair enough that they should be a part of the debate, but voices such as the Institute of Directors point out that the RPC needs greater representation from business, too. Until it does, the suspicion is that the direct cost to business will always be overlooked in favour of some wider “business benefit”.  The latter sounds easy, yet the truth is that government has never invented a convincing set of measures to gauge it.

Third, the exclusion of EU regulations from the plan is correct but exposes what cannot be controlled by Whitehall. The coalition says it will address this by engaging earlier in the EU legislative process to make sure that UK businesses are better protected when the EU proposes legal changes. It will need to, as early lobbying and impact assessments were sorely neglected by previous UK governments of all political colours.

Finally, why not go further, review the cost of individual regulations already in force and start to sweep away those measures which cannot be shown to bring proper value? Why not “one-in, two-out”?

Stuart Miller is a senior partner with European business law firm Miller Rosenfalck, which specialises in commercial and corporate matters for owner-managed and public companies. He can be contacted at sm@millerrosenfalck.com. Jonathan is a trainee solicitor with the firm.

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