People argue endlessly about Britain’s tax burden – now the highest since the Second World War – but almost nothing is said about the time businesses lose to compliance. No Chancellor stands at the despatch box and tells firms they are about to spend another few billion pounds’ worth of working time satisfying new rules. It never appears in the public accounts, but firms pay for it all the same.
The 2021 Census counted roughly 140,000 people in England and Wales in three occupations focused on health and safety, quality assurance, regulation and inspection. At median full-time earnings, that is a wage bill of about £5.4 billion a year.
We have spent years asking why British productivity is so poor, while showing remarkably little curiosity about how much productive time government itself absorbs
And even that is a narrow measure. Compliance sits inside HR, legal, finance, audit, tax, planning and procurement and across heavily regulated sectors from healthcare and construction to education and financial services. Much of the cost is simply buried in people’s existing jobs, which is one reason it is so easy for government to ignore. In smaller firms it often falls on somebody whose actual job is to run the business. The hours disappear into the working week and, because nobody has ‘compliance’ written on their job title, largely disappear from the statistics too.
The OECD gets closer to the real number by looking at the work people actually do. Across its European sample, which includes the UK, regulatory compliance accounts for 3.9% of employment. Apply that to Britain and you get roughly 1.34 million workers’ worth of time – around £52bn a year on the same earnings basis.
Nobody serious is claiming that £52bn is all waste. Some regulation is necessary and some of it is worth every penny. But once the bill is that large, even a fairly modest amount of duplication, poor drafting and pointless administration starts to matter.
If you have ever been involved in compliance you will know the drill: the same information requested in two slightly different formats, guidance so vague that you need external advice and paperwork generated largely to prove that other paperwork has been completed.
We do not know how much of the £52bn falls into that category. At 10%, it would be £5.2bn a year. At 20%, £10.4bn a year – adding up to £52bn over just five years.
If the Government wanted to spend £5bn, Treasury officials would crawl all over the numbers: where the money was coming from, whether the assumptions were credible and what taxpayers were getting for it. Make businesses spend the same £5bn on extra staff, advisers and management time to comply with new rules and the interest suddenly fades. It never touches the public accounts, so Whitehall can impose the cost without ever having to find the money.
That matters in a country with dreadful productivity growth and no great reservoir of skilled labour sitting idle. Every hour spent dealing with regulatory administration is an hour not spent selling, investing, training staff or producing something. We have spent years asking why British productivity is so poor, while showing remarkably little curiosity about how much productive time government itself absorbs.
Successive governments have promised to cut red tape, and the usual method is to count the number of regulations abolished. I have never found that especially convincing. A hundred obsolete rules can disappear from the statute book without saving a business a minute. One badly drafted new rule can create a mountain of administration. The real burden is measured in time and money, not the number of lines deleted from a government database.
So, start measuring the time.
All major regulation should include an estimate of the hours and wage cost it will absorb from business – a Productive Labour Impact Statement, if you will. Whitehall already does something similar on paper through Impact Assessments, scrutinised by the Regulatory Policy Committee, but the weakness is obvious: the department proposing the rule produces the estimate, and once the regulation is in force there is rarely much effort to compare the forecast with what actually happened.
That needs changing. Compliance time should be set out in hours and pounds, with the burden shown separately for different sizes of business. A five-person engineering firm should not be treated as a miniature version of a multinational with lawyers and compliance officers on tap. After a year or two, departments should also have to report what the regulation actually cost in staff time, not simply file away the original estimate and move on.
Britain has tried something similar before. The Business Impact Target, introduced in 2015, required government to publish the net cost of regulation to business. It was eventually dropped. Part of the problem was that modelled pounds are easy to massage and there was no effective budget forcing departments to live within the total.
A staff-hours regime could be harder to game, provided departments were given compliance budgets of their own. If a minister wants to impose a significant new burden, fine – but find an old one to simplify or remove. Major rules should also face a proper review after five years. If the benefits still justify the cost, keep them. If they do not, there is no good reason for the burden to carry on by default.
Regulators themselves should face the same scrutiny. Slow responses, appeal backlogs and repeated requests for information already supplied all impose costs, even if those costs never appear in the regulator’s own accounts.
Government should publish the total each year alongside the Budget: how many hours regulation is estimated to absorb, what those hours cost and where the biggest burdens sit. Ministers are meticulous about demanding costings when they spend public money. They should be held to the same standard when they spend everyone else’s time.
Britain and America have spent a decade arguing about Nimbyism as if it were a housing problem. It is much bigger than that: our inability to build, in a broad sense, has grown into a source of geopolitical weakness. The economic argument has been made already. Growth controls add anywhere from 17% to 38% to […]
What do Richard Tice, Kevin Hollinrake and Peter Kyle all have in common? I wish I had a wittier answer to what sounds the set-up to a poor joke, but unfortunately I only have one answer – they all own an electric vehicle (EV). If three men, who have wildly diverging political views, lifestyles and […]
As an architect and developer, every day I must wade through the swamp of planning rules, building regulations, financial restrictions and NIMBYism peppering the landscape of the construction sector. One set of rules in particular though, and one sub-set of those rules, grinds my goat so intensely for its sheer wanton stupidity and backward-thinkingness, that […]
