Conservative plans to cut £14 billion off red tape burden

John Redwood's competitiveness policy group will present its final report on Friday. The report has been widely trailed in the media. A central recommendation is reported to be a £14 billion reduction in red tape on business. This is reported to include:


Repealing working time regulations;
Scrapping data protection laws;
Reviewing the 1974 Health and Safety Work Act;
Relaxing redundancy laws to make it easier to fire staff;
Reducing financial services regulation;
A simpler regime for administering tax;
Scrapping Home Information Packs;
Reducing the number of Whitehall targets imposed on local authorities.


These proposals sound very sensible. They should make it easier to do business in Britain for both large and small companies and will improve Britain's economic competitiveness. It also looks as though the report will be welcomed by the Conservative leadership, although with no specific promises at this stage.


Regulation imposes a heavy burden on businesses, and so the report is right to focus on specific ways to reduce it. But we don't yet know what the report will say on the burden of tax hitting small and large businesses. We hope it will propose reductions in both the main rate and the small companies rate of corporation tax; relief on business rates, which have done so much damage to small shops and other businesses; and further alignment of income tax and NI, which can be an administrative nightmare for firms. We await the report's publication on Friday with interest.


Of course, much of the tax relief discussed above has already been proposed by the Tax Reform Commission, and so it may be that John Redwood's report need add nothing new in that area. But it would be rather strange if a report designed to provide answers to the problems of Britain's economic competitiveness ignored the burden of taxation completely.


To that extent, it is slightly worrying to read in the Financial Times that the report "will endorse Mr Osborne's mantra that economic stability must come before tax reductions". For that mantra is to admit defeat. An immediate reduction in the overall burden of tax (not a small one at the end of an economic cycle that could last ten years) is a necessary if not sufficient condition of a serious improvement in economic competitiveness. To get that overall tax reduction, spending decisions will have to be made. If the Conservatives are unwilling to make those spending decisions, they will only half-succeed in creating a much more competitive economy.


Other countries in Europe realise that they cannot ignore tax. The Netherlands, Germany and France have all reduced taxes recently, to say nothing of Ireland and the eastern European countries. It's time for Britain to do the same.

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