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Worry about red tape

Posted by Richard Thursday, September 02, 2004

Anatole Kaletsky in The Times today takes on the preoccupation of the chattering classes – house prices – and tells them not to worry. "Proliferating regulation, especially employment regulation", he writes, is now probably the greatest threat to the long-term growth of living standards in Britain.

Over-regulation is also a greater handicap for exporters than the value of sterling, the scale of the consumer boom or any of the other macroeconomic "blunders" attacked by the manufacturing lobbies. Anyone concerned about the sustainability of Britain’s balance of payments should forget about the Bank of England and Gordon Brown and worry instead about the threats to Britain’s export earnings from heavy-handed regulation by the Financial Services Authority or restrictions on animal experiments or employment tribunals awarding multimillion-pound damages against investment banks.
"Unfortunately", he concludes, "that is only the start of a list of obstacles to prosperity and enterprise in Britain".

Kaletsky is dead right on this. After yesterday’s Blog on "eco garbage" I have been trying to put a cost on the raft of EU environmental directives and schemes that are in place coming through the system.

Perversely, this is far from easy. For instance, in a 38-page Regulatory Impact Assessment from DEFRA on the EU’s emission trading scheme, nowhere does there actually seem to be any information on global costs. Nor in its factsheet on "useful facts" (what do you expect in a factsheet) is that information given.

The best I can make out is that it is set to cost us about £500 million over five years, although I am happy to be corrected. That, it seems, pales into insignificance against the WEEE directive, which is projected to cost in the order of £500 million a year.

Then there is the end of life vehicle directive, which is estimated to add about a £100 to the cost of processing scrap vehicles. That will impose another £200 million burden on the economy, while the meeting the targets set in the packaging waste directive will be costing us between £458 million and £656 million a year by 2006.

To all this, of course, must be added the £6.9 billion for new incinerators to meet the requirement of the Landfill Directive, the £16 billion of so for the Framework Water Directive, and an unknown but potentially huge amount for the REACH directive.

At a very rough estimate, it looks like British expenditure on EU environmental measures will cost the economy something like £40-50 billion over the next ten years or so, or between £4-5 billion a year.

That seems to check out with CBI claims made this July, reported by themanufacturer.com which had John Cridland, CBI deputy director-general saying that, "Too much environmental regulation is badly designed and poorly implemented."

In his article, Kaletsky does not put a cost on employment legislation, and does not even mention environmental legislation, but perhaps he should. Billions of pounds are involved, far more than this country can afford. "Red tape" hardly begins to describe the burden, but Kaletsky is right about us needing to worry about it.