Politeia's pamphlet The Cost of Employment: Regulation and the Labour Market by Nicholas Boys Smith*, considers both the extent of this creeping re-regulation and its impact on the behaviour of employers, in the public and private sector. It shows that the cost to the economy is now enormous, and is running at£5.8bn a year (2003 figure). The total cost to the UK economy of new regulation will by June 2005 have been around£30bn. Not only does British business pay the price of regulation, through ever higher compliance costs, but the taxpayer is footing the bill for the huge hike in costs to the public sector. Indeed, the greatest single victim of new regulatory costs is the government's own public sector, which has had to face additional costs of at least£6bn since 1997.
The results of regulation are already becoming clear in the business of Britain. The danger now is of a downward spiral where economic growth will be retarded and productivity impaired. There will be less incentive to encourage the economically inactive back into the labour market. Small firms - those most likely to create jobs - will be less likely to grow and create jobs as a result of recent regulation. Already 50% of small businesses have reduced their workforce or employed fewer people as a result of the burden of paperwork and regulation. Not only that, but the increase in regulation is promoting the 'informal' economy with increasing numbers of businesses tending to play fast and loose with compliance and legality. 'Growth is declining. Productivity is not improving. The economy is increasingly relying upon government debt, personal credit exposure and public spending', concludes the author.
* Mounting Costs: Regulation, Employment and the British Labour Market is published by Politeia, and is available from Politeia, 22 Charing Cross Road, WC2H OQP at£7.
Nicholas Boys Smith is the author of No Third Way: Interfering Government and its Cost to Business (Politeia 2001).