Tips and service charges have once again emerged as a contentious issue for the industry - this time, with government involvement.

BERR (the Department for Business and Regulatory Reform) has announced it will act to stop the proceeds of the service charge being used to make up the national minimum wage.

Following a consultation document issued by the Department, the BHA has been in negotiation with officials and ministers, expressing our concerns at its potential impact on the industry at a time of recession and when increased costs could tip a business into administration.

BERR says that the proposal will affect between 3,700 and 34,700 hospitality workers and will cost the industry between £6.6m and £47m annually every year. Apart from the fact that these are staggeringly vague estimates, we believe that they are entirely incorrect.

In our reply, the BHA is arguing that the changes could affect as many as 73,000 hospitality workers and the cost is more likely to be as much as £450m which could potentially lead to 45,000 job losses.

Which of these estimates is correct? Certainly, the woeful record of the accuracy of government cost estimates does not inspire much confidence in the department's figures.

What is extraordinary is that the government, at its own admission, is proposing to introduce legislation that could cost the restaurant industry as much as £47m a year - this at a time of deepening recession, when consumer spend is down and when restaurants are having to generate custom by means of special offers and cut-price deals. If, as we believe, that the BHA's estimate is correct, we are actually talking of a cost increase ten times greater than even the government is suggesting.

Little wonder, therefore, that the BHA is concerned about the impact of this on an industry largely made up of small, independent owner operators.

Of the 55,000 service and quick food restaurants in the UK, under 20 per cent is group-owned. Attacking the groups for trying to hold back the legislation - as some observers and newspapers have done - makes for an easy target. But the real damage will be caused to the vastly greater number of individual restaurateurs who are currently operating on the edge of profitability.

Here, even an increase in labour costs of hundreds rather than thousands of pounds a month could spell failure for some. Indeed, independent research estimates that 600 businesses will go under as a direct result of implementing this change.

Despite our concerns, it is certain that the legislation will go through; the main question now is when will it be introduced? BERR has proposed October this year - just at a time when the recession might be at its deepest point. The BHA is arguing for a delay until at least April next year in order to help the industry survive (hopefully) the worst of the recession as best it can, without this significant additional cost burden. This seems a modest enough request in a time of such economic difficulty.

Incidentally, we believe that restaurants should be open with customers and explain how the proceeds from tips and service are distributed to staff. Indeed, the BHA has drafted guidelines that businesses can adopt and use in order to keep customers fully informed. Despite contrary claims, transparency is not an issue here; timing is.