Government incapable of cutting red tape, say small firms

SMALL firms expect the government's attempt to help them by slashing red tape will end in failure, research has revealed.

Prime Minister David Cameron last week made former minister Lord Young the new enterprise tsar, giving him the task of cutting rules and regulations.

But Forum of Private Business (FPB) research to be published this week found that 72 per cent of SMEs expect the government to fail in its efforts to slash red tape to the level that helps firms fulfil their growth potential. Two out of five SMEs do not believe the Coalition will significantly reduce the amount of legislation small firms have to comply with, while another 32 per cent did not know if it would achieve its aim of cutting red tape.

Thomas Parry, research manager at the FPB, said SMEs were sceptical of the government's ability to tackle the problem because they feel lawmakers have no experience of the pressures faced by small businesses.

He said: "There seems to be a seismic cultural division between small employers and those employed in the public sector.

"Taxpayers expect civil servants to justify their actions through paper trails, whereas smaller employers do not understand why they should spend time on administration when they are not subjected to the same formal scrutiny."

The FPB wants the amount of time business owners spend on red tape to be halved, but Parry said that could only be achieved through a "radical rethink" about legislation.

The research comes as the Scottish economy struggles to emerge from recession. The latest Bank of Scotland Purchasing Managers' Index report, out today, found that the rate of new business declined for the first time in nine months in October, despite the strongest expansion in business and financial services for five months.

The marginal decline contrasted with mild growth across the UK as a whole. Donald MacRae, chief economist at Bank of Scotland, said: "The Scottish economy has slowed but has not gone into reverse."