A study by Peninsula, the UK's biggest employment law firm, shows that businesses spent £20.73bn wading through paperwork between 1997-2002.
Companies spent an average of £26,762 complying with legislation in 2002, up from £18,242 five years before.
Bosses also admitted spending an average of nine hours a week filling in forms – six hours more than in 1997.
Managing director Peter Done says employers are being drained of what could be healthy resources and made to dedicate substantially longer periods of time and resources to the implementation of employment legislation.
The research shows that this is taking its toll on companies and that heads of business heads are turning against the Government as a result. Nearly four in five companies say that red tape is hitting them financially and only 28 per cent think the Government is business friendly.
Done believes the bottom line is that employers are suffering at the hands of the Labour Government. He says: “We need to see employment legislation adapted to make it viable for small businesses.”
What is most frustrating about spiralling red tape, plus the Government's ever increasing spending and tax raising, is that there appears to be no noticeable improvement in public services including financial services regulation.
The recent case of David Aaron Partnership is the latest example of regulation not working. The failings of the firm will now have to be paid for by all FSA-regulated firms via the Financial Services Compensation Scheme.
Of course, it could all have been avoided if the FSA spent more of its time on licensing the sale of products and the marketing of them instead of taking action after the event. We are constantly reading headlines about the latest FSA fine against a big company, usually for something relatively harmless, such as not gathering sufficient money-laundering evidence or incomplete fact-finds, in other words, for not crossing every t and dotting every i.
Presumably, David Aaron Partnership did all that to the FSA's satisfaction. But what about the way in which it marketed products and, in particular, precipice bonds? The FSA must have been aware of this at the time and, presumably, satisfied about it too.
So who should take the blame? The FSA, David Aaron Partnership or the clients of the firm? I think they were all to blame – the FSA for not doing its job, David Aaron Partnership for hyping up the “low-risk” nature of the products and clients for being gullible enough to be taken in.
Caveat emptor. We are all familiar with the saying that if it sounds too good to be true, it probably is.
The FSA is one of the biggest producers of red tape I have ever come across. The sheer volume of literature pumped out of the organisation each year is unbelievable. It is virtually a full-time job keeping up to date with all the reading material it sends us.
As the FSA is so keen on dishing out big fines, should it not in turn be fined for its own failures in respect of precipice bonds, split-caps, pension transfers, opt-outs and endowments? What about RJ Temple, Equitable Life and David Aaron Partnership, too?
Sadly, red tape is here to stay. It is a growing business for the Government because it justifies its existence and higher and higher taxes to support its tax and waste policies – much the same as the FSA justifies its ever increasing budget by raising its fees each year.
Sir Humphrey of Yes Minister fame would be rubbing his hands with glee if he were around today. Of course, he is still around, it is just his name that has changed.
Benjamin Franklin's famous saying would perhaps be updated to: “There are only three certainties in life – death, taxes and red tape.”
Tony Byrne is managing director at Byrne Williams