Red Tape Challenge To Liberate UK Economy

As part of its Red Tape Challenge, the Cabinet Office is now targeting laws that stifle the development of new business models for no good reason. 

So anyone who's run into bureaucracy in setting up an innovative business should submit their comments at: Red Tape Challenge for Disruptive Business Models.

Once the initial ten-week window has closed, highlighted regulations "will be immediately put on probation, and will be scrapped unless the responsible department can justify or satisfactorily modify the regulation in question."

The two examples cited show how 'red tape' may include the absence of a definitive permission, exemption or exclusion, in the existing regulations (the first example certainly being close to my heart):

"Zopa, a company that provides a platform for members of the public to lend to each other, who found that financial regulations simply didn’t know how to deal with a business that didn’t conform to an outdated idea of what a lender is...
A number of businesses have tried to disintermediate estate agents by providing a platform for customers to sell directly to each other at low or no cost. But Estate Agency regulations treat them as if they are traditional Estate Agents, and place burdens upon them that make very low cost internet-enabled business models unviable."

I couldn't see a ready guide to what else would be considered 'red tape', so it's up to you to decide. As a suggestion, one definition I've found repeatedly referred to is:

"a collection or sequence of forms and procedures required to gain bureaucratic approval for something, especially when oppressively complex and time-consuming."

My own view is that 'red tape' and 'bureaucracy' are the same thing: requirements that either have no purpose or exceed their intended purpose or effect. Examples would include data that is collected but never used. Or a financial system that prohibits diversification. Or financial regulation and tax laws that favour 'traditional banking' over new models.

I'll get my coat.

Low Cost Government

Well, here we are in '09, the last of the Noughties: a fitting epithet for a decade of both reckless abandon and total collapse on the fiscal and financial front.

There's a lot of soul-searching going on, as well as a search for inspiration and leadership. While the US President-elect seems to have risen to the challenge, in the UK the search continues.

Bereft of vision, we look to the past, and it's a sign of the times that I was given Speeches That Changed the World for Christmas. Of course it includes Franklin D Roosevelt's First Inaugural Address, heralding the "New Deal", which has often been referred to in the news lately. It can also be read here.

While FDR's speech and the New Deal must be seen in the context of a more parlous economic situation than today's, and many of FDR's tactics are being deployed today, I was struck by one that's yet to be honoured in the UK:

"... insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced."

I mention it not just because UK civil servants were promised a 2% pay increase in a time of rising unemployment (public sector teachers will get 2.3% extra this year and next, while the Daily Mail shrieks that private schools are closing). I also raise it because New Labour might just mistake the need for fiscal stimulus as a wheeze for saddling us with more civil servants in the long term, who'll generate further cost in terms of random policy initiatives and bureaucracy to justify their existence. See the Taxpayers' Alliance "non-jobs" for examples.

Of course, hiring more public sector workers flies in the face of last September's promise to cut jobs, as reported in the Guardian:

"Separate ONS figures on public sector employment showed the number of people employed by the government fell 44,000 in the second quarter to 5.8 million, the lowest total since the second quarter of 2004. The government has pledged to cut 84,000 jobs by next April as a result of a review conducted by Sir Peter Gershon in 2005."

But as Chancellor, Gordon Brown approved a 13% increase in the public sector workforce from 5.1 in 1997 to 5.8m in 2006, according to the Institute for Fiscal Studies. So, Sir Peter's 2005 review was merely borne on the rising tide.

The IFS also says that public sector pay has caught up with private sector pay, yet about 76% of public sector workers have final salary schemes, versus 17% in the private sector. And public sector pensions are worth 25% of salary versus 20% in the private sector. With pay the same, there's no reason for that gap - if there ever really was one.

But take heart! Perhaps it's a sign the trend is about to reverse that certain people in the public sector are bizarrely receiving their Honours now - it's to reward them before they can be accused of selling out their colleagues.

On that basis, we really should have welcomed the news that, for overseeing massive public sector expansion and bail outs at the taxpayer's expense, the Permanent Secretary of HM Treasury gets a knighthood, while the captains of private sector finance get hunted out of office for their part in Brown's Boom and Bust.

The last of the Naughties?

Let's hope so.

Enjoy the year as best you can!

Consumer Protection from Unfair Trading Regs 2008

I've given up my attempt to independently summarise the Consumer Protection from Unfair Trading Regulations 2008 ("CPRs" in the trade), and am simply going to refer you to what the OFT and BERR seem to make of them.

Oh, alright then. To summarise briefly:

• Regulation 3 bans unfair commercial practices - basically anything unacceptable from an objective professional standpoint which is (or is likely to) change an economic decision of the "average" consumer. In other words, because of the practice the consumer buys (or sells) what they would not otherwise have bought (or sold), or fails to cancel a transaction that they would otherwise have cancelled.
• Regulations 5-7 prohibit commercial practices which are misleading (whether by action or omission) or aggressive, and which cause or are likely to cause the average consumer to take a different decision.
• There are 31 practices that are prohibited in all circumstances - regardless of whether or not they actually affect a consumer.
• Oh, and this is all backed by criminal and civil enforcement powers and remedies.
  

Of course, this is fantastic example of EU overkill. There is simply no major consumer problem in the UK that deserves a whole swathe of new regulation which is harmonised with Greece.

Okay, so there are still dodgy traders, but we have TV shows that doorstep those guys for fun.

But some lawyers are getting pretty worked up about these regulations from a compliance standpoint (did I mention the criminal and civil enforcement provisions?). But this misses the wood for the trees. Any consumer-facing business that is reliant on these sorts of practices for its bread and butter has heavy cultural issues to contend with, and these issues could go right to the top of the tree. Cultural change is tough, and it isn't driven from the compliance coal face alone.

Which is why I enjoy advising Web 2.0 businesses - as they are predicated not only on treating consumers fairly, but enabling consumers to ensure that they are treated fairly.

Interesting issues for some eBay power sellers, though, and I guess there may be some old sharks who'll find themselves with a fine or making licence plates.

Lest we forget, there are also changes to the comparative and misleading advertising regulations. Basically, the Business Protection from Misleading Marketing Regulations 2008 ("BPMMRs"):

• prohibit advertising which misleads traders (Reg 3);
• sets out the conditions under which comparative advertising is permitted (Reg 4) - including the condition that the ad must not be misleading either under Reg 3 or the CPRs (see above);
• requires traders and bodies responsible for codes of conduct or monitoring compliance with such codes not to promote misleading advertising and comparative advertising which is not permitted (Reg 5).

And, unlike the rather limp Advertising Standards Association advertising codes, these puppies have teeth - criminal and civil enforcement remedies and nasty accompanying powers.

West End ad agencies will never be the same again.

Preparing Britain for the Future

Alarmed by the loose wheel nuts on this New Labour machine we're all riding in, I've been delving under the seats in a desperate attempt to find anything that might tell me where we're headed and just how dangerous it might get.

This evening, I found the Government's legislative proposals for 2008-09 under a jumbo crisp packet and the greasy remains of a cornish pasty in the rear of the cab.

Apart from the smell, the first thing that slaps you in the face is that these guys plan to do an awful lot - too much, one senses, if they are to really achieve much. This government is a great one for gallons of policies, tapping the brakes and U-turns. Not good if you're prone to motion sickness.

Second, while there are no funding details, of course, all this planning feels really expensive in terms of consultants, and additional civil servants to staff all the new agencies. In other words, boiling an ocean consumes a lot of gas. And all the chat about better regulation, only seems to mean more regulation, if only to gather the existing regulation into neat and tidy piles for lawyers to sift through (page 72). The words "Titanic" and "deckchairs" spring to mind.

Third, and most importantly, there's absolutely no sign that this government is remotely concerned about reducing public sector costs, eliminating waste, enhancing productivity or educating civil servants to work smarter rather than hiring extra "special advisers" to get things done around them. This can't end well.

Anyway, here are 7 things that shone at me out of the rubble:

1. We're going to get a a "Bill of Rights and Responsibilities" (p. 65), so be prepared to call Radio 4 to argue for outrageously generous personal rights and extremely high expectations of others.
   
2. A "community empowerment" bill (p. 66) will make it lawful to lynch local councillors for squandering our council taxes if we can only lobby hard enough.
3. Business rates will increase 2% to fund some kind of local authority "economic development" budget (p.12). Does this mean that local authorities are better at economic development than local businesses?
4. 8 million low income earners will be forced to take bank accounts to qualify for The Saving Gateway, a scheme that matches government handouts with individuals' own savings (p. 29). No mention of bank fees, or savings rates that will apply, but this is chum in the water for the retail banking sharks. You can already see their fins on the surface. Also a nice way to ensure that people lend to banks while the banks are refusing to lend it to each other (or anyone else, for that matter).
   
5. At last we are going to get 3 new, additional, extra education agencies - to regulate tests, skills funding and apprenticeships for some reason (pp 14-15). These agencies are vital, as they act as human shields for Ministers against citizens and the media.
6. An oddly named "Bureaucracy Champion" will be appointed to cut red tape the for the police (p. 18). Why can't the police find the people who created the red tape in the first place and beat them with truncheons until it's all removed?
7. Great news for IT vendors - a new Communications Data Bill will increase police access to our personal communications data, which will mean lots more IT kit to record and store it all. Really securely.

Remember: don't drink the Kool-Aid.