Businesses of all size have long been frustrated by regulation. Government says it want to get rid of unnecessary red tape to kick start growth. But does it know what good regulation looks like?
One of the great frustrations of running a business is dealing with red tape. U.S. Supreme Court Justice Oliver Wendell Holmes Jr. said: ‘The price of civilization is taxation’. Perhaps another price of our cherished civilisation is regulation. As a professional accountancy body ACCA is not against regulation. In fact we’re very much in favour of good regulation. The sort of clear rules and frameworks under which businesses and individuals can operate. This not only drives trust but provides certainty, clarity and stability. Characteristics which ensure business can thrive, carry on their trade with confidence and grow – both for their own profit and for the advantage of the wider economy.
But what we – and our members – are against is bad regulation. And that’s what we have sought to express to the UK government in responding to its consultation Unlocking business: reform driven by you.
It should be acknowledged that it was to its credit that the UK government kicked off this consultation – which ended late last year – seeking the opinions of business if all sizes about regulation which was ‘not fit for purpose and unjustifiably inhibits growth innovation and investment.’
Business has long highlighted a number of concerns about the burden of regulation. Complaints that over decades, have not always been fully addressed by regulators or policymakers. That said it may have been tempting to present a list of individual requirements that could be streamlined or simplified.
Our hope is to encourage politicians and civil servants – many of whom may not have firsthand experience of the day-to-day realities of running a business – to consider the bigger picture of regulation – from the perspective of businesses working every day to stay profitable while navigating a range of regulation. We wanted to suggest government needs to adopt a holistic strategy on regulation. It is not one rule that has to be followed or one report that has to be filed which drags down business it is the cumulative effect that ultimately weighs on business.
If we want to make the UK a great place to do business ensuring regulation is proportionate and fit for purpose is key. This is also why we start by recommending a ‘one minus two approach’. We can’t claim to have invented the idea – the government tried to adopt it in the mid 2010s – and its worth another go. For every new business law that is put in place, two laws are removed. If it does nothing else it makes regulators think about the real life impact on business of adding a new law. If that is introduced what could and should go?
We also recommend that the state works smarter to make regulation work. We know data privacy is important, but businesses want to see improved data sharing between regulators. This would stop the duplication businesses experience when they tell yet another arm of the state the same information which they’ve told countless others. We know linking up tech between different agencies is a challenge, but it is one that should be met now. Parallel processes and overlapping obligations create complexities in compliance which need to be removed.
And if there is one overarching regulatory burden which ACCA members negotiate daily it is the UK tax system. This can’t be changed overnight. But no one can argue that the UK tax system is not complex or difficult to navigate. ACCA has repeatedly highlighted the complexity of the tax system, including the challenges associated with navigating different thresholds in relation to grants, taxation, and ratable grants. Piecemeal changes cascade downward, increasing complexities and small-scale errors requiring compliance. Any government should build on the principles of simplicity certainty and stability and committee to a programme of tax simplification which would encourage innovation and economic growth.
We said we want good regulation not no regulation and we mean it. That is why we call again for legislation to establish without further delay the Audit, Reporting and Governance Authority (ARGA). This will give businesses certainty and ensure the UK maintains its reputation for the highest standards of corporate governance.
Finally regulation needs to reflect the modern world. That’s why we support legislation that promotes the ethical and responsible use of AI in a safe and transparent environment. The UK’s principles-based approach to AI should be accompanied by adequate safeguards with standards oversight to ensure consistency.
Regulation can hinder business. Or it can be a catalyst strengthening trust and confidence in the economy. What will we choose?
