Red Tape Challenge: Why entrepreneurs must grasp the opportunity

Dan Martin
Former editor
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Mark Littlewood, director general of the Institute of Economic Affairs, discusses why small business owners should get involved in the government's crowdsourcing efforts to reduce red tape. 

Virtually every government in recent times has professed a desire to reduce and streamline the regulatory burden on British business. However genuine the intentions, these initiatives have typically failed. The quantity of red tape – and its reach – just goes up and up. Those running and setting up businesses – or those merely contemplating pursuing an idea which might lead to starting up a company - therefore find themselves in an extraordinary position. There seems to be a general consensus that the hoops and hurdles which businesses face are simply too hard to navigate in a simple and straightforward fashion. Yet the number of these obstacles just continues to grow.

The coalition government has pledged to tackle red tape and make life easier and simpler for both established and “unborn” businesses. Its first step was to adopt a “one in, one out” policy – the concept being that a new regulation could only be adopted if an existing regulation was extinguished.
This may have achieved something in stemming the ongoing avalanche of red tape, but it has not been accompanied by the scale of rollback which the political rhetoric seemed to promise.
The difficulty is that a commitment to reducing regulation in broad, general terms is often out-trumped by special pleading for a specific new rule to deal with a particular problem, whether actual or perceived. In short, there are nearly limitless exceptions to the rule. Ministers, civil servants and advisers will plead that whilst regulation in general may be undesirable, just a little bit more of it in the area they are focusing on is just what the doctor ordered.
In an attempt to overcome this, the government has established its Red Tape Challenge. The concept lying behind it is essentially to switch the “burden of proof”. Rather than the assumption being that wisdom can usually be found in the advice of a Whitehall mandarin or “expert” pressing for new rules and regulations, companies – and the wider public – are being asked to explain which regulations are inhibiting and limiting their ambitions. For regulations that are challenged in this fashion, the working assumption will be that the regulation should be scrapped. The burden of proof will be placed on those defending the regulation, not those seeking its repeal.
The Red Tape Challenge website allows open access to anyone seeking to push back against the present regulatory burden. Once the objection has been put, the regulation in question will be identified and the relevant department asked to justify its existence.
This exercise has no absolute guarantee of success, of course.
Firstly, even if businesses feel they are choking under red tape, they sensibly spend most of their time simply getting on with their work and trying to make an honest buck. A company which invests in ruminating about the policy framework it has to operate under rather than focusing every last ounce of effort on retaining and growing its customer base is unlikely to be maximising its rate of return. That doesn’t mean that red tape isn’t a colossal burden for business, but it does raise problems for engagement. The natural approach of a Whitehall official is to consider policy and regulations all day, every day. The natural approach of an entrepreneur is to get their head down and try and turn a reasonable profit. It is therefore vital for those involved in co-ordinating the Challenge to take every possible step to reach out to and engage with the private sector, rather than sitting back and assuming that company directors, chief executives and middle managers will suddenly divert their attention to beating a path to Westminster with a thoroughly audited and detailed list of complaints. That’s going to be no easy task, but at least the website platform makes collecting feedback as straightforward as possible.
Secondly, however infuriating and bizarre some red tape may seem, it all had some sort of justification at some point in time. Those regulations which really are wholly anachronistic – relating perhaps to areas of economic activity which no longer exist in the modern world – will be the easiest to abolish and to add to some final tally of “rules scrapped”, but will do little or nothing to help facilitate growing businesses in the 21st century economy. So, it’s crucial not just complaints against present regulations are registered, but that the true impact of these regulations is clearly spelt out.
The Red Tape Challenge is not a panacea. But it does offer a clear mechanism for companies and entrepreneurs to push back against the regulatory mindset. It’s now up to the business community to make the most of that opportunity. I, for one, hope the opportunity is grasped with both hands.
Mark Littlewood is director general of the Institute of Economic Affairs and an independent adviser to the Red Tape Challenge.

Mark Littlewood was one of the expert panellists who took part in a live and exclusive Red Tape Challenge webchat from 10 Downing Street on 12 January. It focused on creating new business models and the red tape that hinders them. To replay the webchat, click here.


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