Regulation and Business Advice - The role of government and the role of advisers

The Department for Business, Enterprise and Regulatory Reform (DBERR) has published a report from the Better Regulation Executive (formerly part of the Cabinet Office) on Regulation and Business Advice.

The Report is aimed at government, with a view to reducing the costs incurred by businesses in buying in advice on legislation. The following is the Executive Summary from the Report.

Every year almost half of businesses seek external advice about how to follow regulations. This advice comes from a range of sources including accountants, solicitors and consultants as well as government sources. Commercial advice services exist to cover almost every type of regulation affecting business including employment law, health and safety, environmental regulations, and financial regulations.

Businesses spend at least £1.4 billion each year on advice to help them comply with regulation. Businesses will pay for advice if they feel that this is cheaper or easier than following regulations on their own. The government can make real reductions in how much businesses need to spend on regulatory advice by tackling the 5 drivers of advice identified in this report, these are:

Volume and complexity;
Low awareness of government guidance;
Regulatory change;
Poor quality government guidance; and
Uncertainty, risk and lack of confidence.

By taking action to reduce the effects of these drivers government can reduce the overall costs businesses face in following regulations. The recommendations in this report would make a real difference to the experience of regulation for businesses. Actions delivering even a 5% reduction of the lowest estimate of the size of the market for business advice on regulation would give mean a reduction in business spending of more than £72 million.

Even if significant progress is made on tackling the 5 drivers of advice there will still be a role for business advisors in the delivery of regulation. Economies of scale mean it is often more efficient for a single business advisor to gain a detailed understanding of a complex area of regulation and sell this on to businesses than for each businesses to learn about the regulations for itself. There are also areas of regulation where we would expect businesses to seek external, expert advice, such as high risk health and safety.

There will therefore always be a role for intermediaries in advising on regulation. However, this should not obscure the fact that the market for regulatory advice is a market that is the product of the way government designs and implements regulation. There are areas of regulation where businesses would need less advice if the design and delivery of regulation were improved.

Among the key recommendations of the Report are:

All guidance for regulations affecting business should be issued 12 weeks before the regulation comes into force except in exceptional circumstances (such as emergency legislation). Guidance must still be issued in line with the current Common Commencement Date process, i.e. that regulation affecting business should come into force on either 1 October or 6 April.

The government should develop ways of contacting business directly, by post or email, to inform them of upcoming changes to regulations, including simplifications. This communication must be short, risk-based and focused on the most important changes. It should reach as many businesses as possible that are likely to be affected by the changes, and link back to high quality guidance on the businesslink.gov.uk website.

Intermediary organisations already provide regular communications to their members and clients in a way that businesses of different types find most appropriate. Provision of high quality regulatory information to these intermediaries will allow them to add their own value to the content before communicating with businesses. This allows rapid onward communication to many businesses in a format they will find helpful and could link through to other sources of government guidance.

To help businesses become informed consumers of business advice, an indicator of the average time taken to comply with a regulation should be included prominently on suitable guidance documents. This will help business to assess whether it makes financial sense to seek external help or not.

Web forums which allow businesses to share information and advice are an effective way of helping them to become better informed. Government advice services should consider posting answers to regulatory questions on online forums.

For inherently complex or high risk areas of regulation where we would expect businesses to seek external advice, departments and regulators should consider developing dedicated sources of information for advisors. For example, HMRC have developed a range of dedicated information for tax advisers.

(The Department for Business, Enterprise and Regulatory Reform (DBERR) brings together functions of the former Department of Trade and Industry and the Better Regulation Executive (BRE), previously part of the Cabinet Office.)

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Further information:
Regulation and Business Advice - A report by the Better Regulation Executive

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