I am announcing today a strengthening of this Government’s commitment to bear down on unnecessary regulatory burdens on small businesses.

The Government recognise that the burden of regulation falls disproportionately on small businesses. They have therefore already taken specific and concrete steps to reduce the burden of regulation on smaller businesses, for example:

Saving SMEs £388 million by not extending the right to request time to train to businesses with fewer than 250 employees.

Exempting smaller retailers for three years from the display ban on tobacco, which applies to supermarkets and very large stores from April 2012.

Phasing implementation of pensions automatic enrolment, so that small business will not need to comply until June 2015.

This Government are also reducing the burdens of EU legislation by holding the European Commission to account on their commitment to seek exemptions and lighter regimes for SMEs in new proposals. The Commission’s March SME scoreboard published recent examples, several of which are already bringing major benefits for UK businesses, such as the agreement exempting up to 1.4 million UK small businesses from certain EU accounting rules.

We are also reducing the stock of regulation through the red tape challenge. Many changes resulting from this process will help small businesses. Examples include:

Our radical package of employment tribunal reforms is expected to deliver £40 million of savings per year to employers.

We are committed to a major deregulation of entertainment licensing through 2013.

We are freeing around 1 million self-employed people from health and safety law whose work poses no harm to others.

This Government introduced a three-year moratorium on new domestic regulation for micro-businesses and start-ups from 1 April 2011, in order to support growth and establish a period of increased regulatory stability for the smallest businesses.

The moratorium is an important mark of the Government’s aspirations for reducing regulatory burdens on the smallest businesses.

It reflects established evidence on the disproportionate burden that new regulation places on smaller business, as well as their importance for jobs and growth.

We are now building on these achievements by extending the moratorium in the second half of the Parliament to cover small businesses as well as micros. This will now be known as the small and micro-business assessment (SMBA). It will be supported by independent scrutiny from the Regulatory Policy Committee.

All new proposals for regulation will first undergo an initial departmental impact assessment which will be considered by the independent Regulatory Policy Committee, before facing further challenge and scrutiny by the Reducing Regulation Committee (RRC), a sub-Committee of Cabinet. If at any stage, unnecessary burdens on small businesses are identified, proposals will only be cleared if an exemption is granted to smaller businesses—or if disproportionate burdens on small businesses are fully mitigated.

The Government’s default assumption will continue to be that where a large part of the intended benefits of regulation can be achieved without including smaller businesses, then a formal exemption should apply.

However, where a legislative exemption is not feasible, RRC will only clear new regulatory proposals that provide for a full mitigation of any disproportionate burdens on small businesses and micros. That might include, for example:

extra time for small businesses to comply with new regulations meaning that changes to equipment or processes can be made a time that makes sense for the business; simplified record keeping requirements for smaller businesses, meaning that those with less staff have to spend less time filling in forms and keeping records compared to larger business; tailored advice and guidance so that smaller businesses can quickly find out what regulatory changes mean for them in practice; varying regulatory requirements by size of business, such as inspection frequencies or licensing requirements to ensure a proportionate regulatory approach.

We will also expect Departments to present, as part of the accompanying impact assessment, clear evidence as to the potential impact of the regulation on small businesses and micros, and the effect of their proposed mitigations—including realistic assumptions on levels of compliance.

This change applies now for significant new regulatory proposals that will come into force from 1 April 2014. I have invited the chair of the Regulatory Policy Committee to provide independent challenge to the evidence provided by Departments as part of their “fit for purpose” rating system of impact assessments.