Tuesday, December 28, 2004

Not me, guv

"Who'd run a business?" asks Ruth Lea in her "personal view" published in the Daily Telegraph business section today.

Launching into familiar territory, she notes that regulations are estimated to cost business £100 billion (or 10 percent of GDP) a year, but then launches off in a tangent, suggesting that, while the regulatory burden continues to increase in this country, other continental economies are beginning to recognise the problem and do something about it.

Her catalogue of woes makes sombre reading, not least because a substantial part of the new burden coming our way cannot be blamed on “Brussels”. There is, for instance, the "Warwick Agenda", an agreed set of employment law reforms for Labour's third term, which was decided in July 2004 between union leaders and Government ministers.

The measures included ending the "two-tier workforce" in public services, extending the ban on the dismissal of striking workers from eight to 12 weeks and increasing redundancy pay.

Then there are the proposed extensions to "family-friendly policies", including increased paid maternity leave and greater flexibility for parents with young children, as advocated by Patricia Hewitt and seconded by the Chancellor. The Chancellor specifically announced in his pre-Budget Report that paid maternity leave would increase from six months to nine months in 2007, with the goal of a year's paid maternity leave.

Nevertheless, Brussels is right there, adding to the burden. Writes Ruth Lea, the Temporary Agency Workers Directive is temporarily in abeyance, but the Information and Consultation Workers Directive is due to be phased in between 2005 and 2008 and the Equal Treatment Directive concerning age and disability is due in 2006.

Coincidentally, also in the pages of the business section is news of another impost - the third EU money-laundering directive due to come into force at the beginning of 2005.

The two earlier money laundering directives are estimated to have cost the British financial services sector around £100m and now, under the regime imposed by this new directive, universities and service businesses such as office cleaning companies will need to change their business practices, being prepared to notify authorities of any suspicious transactions – i.e., any customers who want to pay more than €15,000 in cash.

The third directive will draw in a host of businesses that are less attuned and not so aware of the risks of money laundering, and that will in many cases not have the necessary safeguards in place. The need for these companies to now track and report on potential money laundering attempts will introduce a new administrative burden – and cost.

It is suggested that, for many companies, the solution is to appoint a specific person to deal with the regulations but, as always, this would be costly for smaller businesses.

If these regulations actually achieved anything – like preventing terrorist activity – there might be some justification for them but, as some experts have observed, the flow of notifications has now become so great that it exceeds the authorities' capabilities to process them. Suspicious cash movements tend to be "buried" in the welter of information about perfectly legitimate transactions and the problem is now set to become considerably worse.

As always, the answer is "targeted" intelligence but this has never been the strong suit of government – and especially EU – organisations, which prefer to go through the procedural motions rather than achieve anything constructive.

Thus, in the dog days of the old year, as we look forward to the bright new year of 2005, the story remains the same – another day, another regulation. And, if Ruth Lea is asking "who'd run a business", increasingly, to the detriment of economic activity in this country, the answer is "not me, guv".

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