Regulatory burden on business up by £6bn a year under Conservatives

The regulatory burden placed on businesses has risen by £6bn a year under the Conservative government, a new report has found.

Impact assessments attached to more than 3,500 pieces of legislation over almost a decade have cost firms a gross £35bn a year – with £39.6bn in one-off costs – or up to £57.1bn, with £148bn in one-off costs, if pension reforms were included, the study found.

Researchers at the Centre for Policy Studies (CPS) looked in-depth at 3,528 items of legislation from 2010 to 2019 to calculate the additional annual regulatory costs.

Their report, titled ‘The Future of Regulation’, found that despite accompanying benefits which the government claimed offset much of the costs, the annual net burden rose by £6bn – the equivalent of nearly a 2p increase in corporation tax.

It came despite repeated promises from ministers to shrink the regulatory burden. The CPS even warned that its figures were an underestimate, thanks to what they said were “glaring flaws in our regulatory regime including significant errors or miscalculations”.

Authors Tom Clougherty and CPS director Robert Colville warned that the MiFID II financial regulations were said to deliver a net annual benefit to business of £105.20, rather than a net annual cost of £105.2m.

The government also claimed introducing a plastic bag tax at supermarkets was a “deregulatory” measure in order to claim £1bn in regulatory savings across the parliament.

Only one department – the Department for Environment, Food and Rural Affairs (Defra) – has a full audit of the regulations it has imposed.

The report urges all political parties to commit to taking the impact of regulation as seriously as the impact of tax and spending.

It calls for measures including: a new regulatory audit office to be created; a senior minister to have oversight, like the Chancellor has of fiscal policy; a full audit of UK regulation; and for all regulations to have their impact re-examined five and 10 years after being passed.

“At the moment we simply do not know what regulations successive governments have imposed, or what their impact on the economy is – and the picture gets more blurry with every new measure,” Colville said. 

“We need to do far more to monitor both the stock and flow of regulation – and to make ill-considered rules both harder to pass and easier to remove.”

Former business secretary Sir Jacob Rees-Mogg welcomed the report as “impressively detailed”, and stressed: “Regulation must be taken as seriously as spending. 

“Until it is, the burden on business will increase. This means that the economy will not grow, which will make us all poorer than necessary.”

John Penrose, former government anti-corruption champion, added: “Every pound of red tape costs has the same effect on our economic growth, jobs and exports as a pound taken through tax. But governments of every stripe behave as though it is free. 

“Treating red tape costs as seriously as taxpayer-funded spending is long overdue.”

A government source said: “It’s hard to argue with the findings of this report. Successive governments have been guilty of regulating as a first choice, rather than a last resort – as Kemi Badenoch noted in her speech to TheCityUK last week.

“But as of January 1 this year we have scrapped over 2,000 EU laws, with many more to come; and started a smarter regulation programme that will reduce the burden on businesses.”