25/06/2009 - 00:00

Mired in a minefield of over-regulation

25/06/2009 - 00:00


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Red tape hurts business and, ultimately, consumers.

Mired in a minefield of over-regulation

RED tape is one of those generic issues that bugs business at almost every level.

At its best it's an irritant, at its worst it's time consuming, costly and damaging. Red tape will come up in any survey of business people, though it rarely claims the number one spot when respondents are asked to rank the issues by importance.

Perhaps that's because it is such a constant that business consider it more like ambient noise, something you get used to and only notice how bad it is when, perversely, it's not there.

Red tape is one issue the Institute of Public Affairs has reviewed in a joint project with locally based Mannkal Economic Education Foundation. Last week, the foundation released a study called 'Over-ruled: How excessive regulation and legislation is holding back Western Australia'.

The study makes a lot of good points and it's clear that the issue is big in WA.

You only have to look at the work the new government is doing on trying to rein in the assessment process for development approvals.

During the boom, stifling regulations significantly affected industry and caused delays to all manner of projects that might now be going and keeping people employed.

Thankfully the government is seeking to change the approvals process so that the community and industry get the best outcomes, rather than just rules which stop anyone from doing anything.

It also has its own in-house red tape task force attacking the problem; with some vigour, from what I understand.

One of the problems this study identifies is that WA has no mechanism for filtering unnecessary new rules to highlight their cost, or ridding us of old rules that no longer make sense.

Talk to any businessperson and they will proffer tales of unnecessary bureaucracy - petty rules they believe really don't matter in the scheme of things.

The reason for that is rules designed by the well meaning to fit a certain situation often become cumbersome when applied universally. While I acknowledge that many in business and the general community create the perceived need for government intervention, it is often the case that blanket rules usually have too wide an impact.

Unfortunately, red tape in WA is all too often identified as rules governing social issues such as shopping hours, liquor licences and the availability of taxis. The study, undertaken by two IPA researchers, follows this theme.

These are big issues in our community and they do affect general business because of their impact on the quality of life of some employees. In many ways they become a focal point because it is something that business and the general public have in common.

I don't believe these rules are as great a threat to our economy as unnecessarily holding up development approvals, for instance.

More importantly, at least two of these subjects - retail trading and liquor licences - have been debated thoroughly in the community.

However, what this debate does reveal is that regulation - seen or unseen - is often an anti-competitive tool.

In WA, so-called small business has used regulated trading hours effectively to keep the major retailers at bay. I'd estimate that there's something like 15-20 per cent of market share the major supermarkets can't get because of the lack of Sunday trading.

That's not just a cost in revenue. They have huge land holdings and capital invested in shopping centres, which are unproductive for one day in seven. In a theoretically, perfect world, they'd have a case against the state - and us as taxpayers - for stopping them from adequately using their resources. In that world, consumers would also understand how much regulation equals higher prices.

But it's not that world. The state rarely allows compensation for the rules it applies.

The big players are slowly making the economic argument. Take, for instance, the change in the language they use. They no longer talk about small retailers but refer directly to their main competitor, IGA, and how that group profits from the current regulatory system. In this regard they are shifting the argument to one about the dollar gain for a competing corporate, rather than the threatened lifestyle of mum and dad shopkeepers.

However, they do make it hard to be sympathetic. For example, while researching a number of columns on the issue of liquor licence applications I noticed the biggest objectors to new licences were the major liquor chains, owned by the supermarkets. They frequently used their legal muscle to nip potential competition in the bud.

So it's a two-way street. Business hates regulation, unless it suits them.

But red tape is much more pervasive than the subjects argued about on talkback radio. Consumers ought to be aware that every silly rule they encounter - from when they can shop to whether they need to order a meal to buy an alcoholic drink - is a fraction of what businesspeople have to deal with.

More importantly, there is always a cost, which ultimately hits the consumer in the hip pocket.

Those opposed to regulation would do well to highlight that cost as part of their argument.



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