Mandy's mixed message on regulation

As part of a statement regarding measures to help businesses cope with regulation, Lord Mandelson has today announced that the Government is going to shelve its plans for regulatory budgets, which would have seen departments having to account for the cost of, and therefore restrict, the new regulations they produce.

In our report on the cost of regulation to the UK we welcomed the Government's plans for regulatory budgets as one way of stemming the increasing flow of regulation, although we did question how departments would cope with the fact that the most costly regulations actually come from the EU and are essentially out of their control.

According to PA, Mandelson said his reason for pulling the plug on these budgets is due to the "economic situation" and he pointed to the need for new regulation "in response to the current banking crisis".

However, with financial services regulation acounting for only around 5% of the cost of all regulation introduced in the last ten years, it would seem that the Government is throwing the baby out with the bath water.


Given that Government budgets tend to be 'flexible' at the best of times, introduction of the budgets would be unlikely to jeopordise any new financial services regulations, which the EU/UK propose in the coming weeks/months.


What is important is that the Government continues to recognise the importance of quantifying the cost of regulation, plus the fact that the vast majority of regulations impact on small and medium sized businesses. Backpeddling on plans to introduce these budgets gives the wrong signal to businesses struggling to cope with the recession.


Mandelson also announced that, "The Government will also be working closely with EU partners to further embed the EU better regulation agenda and to ensure the current pressures on business are taken into account when new European regulation is being considered."

But today's announcement undermines any attempt by the UK to lead by example at EU level in tackling the increasing flow of EU regulation affecting businesses across the EU. The UK and the EU need more, not less, robust processes to cope with burdensome regulation.