A nine-year-old girl in Logan City Council, Queensland, has been forced to give up her wish to run a homemade cake stall because of exorbitant overregulation from state and local governments.
The young entrepreneur, Tara McVeigh, planned to sell baked goods including cupcakes, cookies and brownies at a local market. She was hoping to earn some pocket money, having exhausted the amount of household chores her parents would normally pay her to do.
After having booked the stall, the girl’s mother learned they were required to obtain a ‘temporary food license’. In addition to a considerable amount of paperwork, the licensing process required an $88 application fee, which increased to $150 because it was with a week’s notice, a kitchen licensing and approval fee of $318, as well as a $435 renewal fee under the Food Act 2006.
With the total cost of the licensing approaching $1000, Tara had no choice but to abandon her aspiration of earning a bit of money through her own hard work and initiative.
The girl’s mother stated:
“She [Tara] was distraught…”
“It’s all so regulated now, kids will say ‘I’m really not allowed to do anything ambitious until I’m 15 and allowed to work at McDonalds’.”
A spokeswoman for the local council defended the current regulatory regime:
“Food safety regulation is paramount to educate the community and reduce the number of food poisoning incidents.”
“For those wanting to proceed with using their home kitchen, the premises would be subject to an approval process. Council can consider written requests to reduce fees when the scheduled fees are considered unreasonable in the specific circumstance.”
This response embodies the contempt policy makers often show towards small business and entrepreneurism.
While big businesses have the capacity to afford compliance costs, red tape punishes small businesses which cannot afford to hire armies of lawyers and accountants to navigate mazes of convoluted regulations.
Overregulation not only hurts small business and raises prices for consumers, but discourages entrepreneurship and business creation from taking place. This is evident in this instance, where regulatory costs have directly prevented market participation.
The girl’s mother also stated:
“I understand safety concerns and regulations but if people are highly allergic they’re not going to buy from a market store like that.”
Regulatory burdens tend to enlarge when it is believed that they are making people safer. However, as identified above, this rationale can lead to the assumption that people are incapable of making decisions in their own interest. As such, the true effect of regulation is often not to make people safer, but to reduce individual choice, making entrepreneurs and consumers worse off.
This instance is a clear demonstration of how red tape hurts everyday Australians. Asking a child to pay nearly $1000 in fees to open a cake stall is a case study in bureaucracy gone mad. Regulation must be devised to promote safety without raising costs on consumers, or discouraging people from engaging in productive economic activity.
By Michael Husek