Action needed over rising regulatory costs

MPA says cumulative environmental and planning costs and burdens highlight need for radical reform  

A PRELIMINARY assessment by the Mineral Products Association (MPA) has identified high and rising regulatory costs imposed by government as well as a broadening range of regulatory charges and regulatory processes which are duplicated, inconsistent and disproportionate.

Examining only planning and environment-related regulation, 228 laws and regulations were identified which have to be managed by the mineral products sector.

The aggregates levy, landfill tax and energy and climate change taxes and other planning and environmental measures currently have an estimated cost of £400 million annually, and the potential impact of both new and existing measures could increase this to £750 million per annum by 2020.

This is in addition to other regulatory and tax costs such as fuel duties, net VAT and employers’ National Insurance, which currently cost the sector more than £900 million per annum.

According to the MPA, there is a widening scope of lower-level charges from regulators which is adding significant sums to the planning and development process, including planning application costs, pre-application and consultation charges, and the costs of duplicated environmental impact assessments.

MPA survey data show the operation of the planning system still remains too slow. There are too few plans, low aggregate landbanks, diminishing mineral replenishment rates, increasing costs and planning inertia all fuelling uncertainty, while lack of demand masks underlying supply problems for the future.

With a significant degree of inconsistency, lack of proportionality and duplication in regulatory processes, associated costs can be difficult to quantify but involve substantial industry resources to implement and manage, says the Association.

It adds that while regulation in Europe or the UK may be introduced for the best of motives, achieving the best environmental/sustainability outcomes can be compromised by inflexible and ‘awkward’ implementation. Economic impact assessments carried out by government are often inadequate as they are carried out for individual regulations but do not address cumulative impacts. 

The net result, says the MPA, is the imposition of excessive regulatory costs which feed through into the costs of doing business in the UK. For mineral product businesses still operating at market levels 30% below those in (pre-recession) 2007, these costs and the regulatory overload inhibit investment by SMEs and raise questions about the relative benefits of investing and operating in the UK by international mineral product businesses. 

Research by Capital Economics has identified the mineral products industry as one of the most important production and manufacturing sectors in the UK, with a turnover of £9 billion, a GVA (gross value added) of more than £4 billion and supplying industries with a combined turnover of £400 billion. As a result, costs imposed on the industry work their way through a significant proportion of the UK economy, impacting on competitiveness and jobs.

Commenting on the assessment, Nigel Jackson, chief executive of the MPA, said: ‘There needs to be a genuinely radical re-think of the cumulative impact of regulation and taxation on our sector. In too many cases costs have been imposed on our industry without sufficient consideration of economic or environmental outcomes. This must change.’

He continued: ‘The cumulative impact of regulation from different and uncoordinated regulators on sectors such as mineral products needs to be recognized, assessed and managed better by government – currently there seems an assumption that industry can absorb any expansion of costs and burdens imposed by public agencies. This too must change; we are now at the limit of what we can absorb.

‘With demand continuing to roll along the bottom and our members focused on survival, something new and radical has to be done to address these real but unseen cumulative impacts,’ said Mr Jackson.

‘We have submitted our evidence to the Treasury and BIS and hope that this contributes to the forthcoming Autumn Statement and current regulatory reviews. We are ready to help unpack these complex issues to help get the urgent growth that we all want to see happen.’