One of David Cameron’s best pledges as Prime Minister was to lead “the first government in modern history to leave office having reduced the overall burden of regulation.” He rightly argued that unnecessary regulation was a barrier to the growth and prosperity that the country badly needed. He demanded a much less bureaucratic government that supported citizens and enterprise rather than frustrating it. It was a key part of his welcome ambition to build a big society, not a big state.
At their best, regulations provide the framework for a stronger and more productive economy. They protect the vulnerable from harm, uphold the rights of consumers and promote a level playing field for businesses. Every regulation however has a cost and when regulation is badly imposed, it can become a stifling burden. The history of regulation is that it is much easier to introduce than remove. During his time as Prime Minister, Tony Blair pointed out that while there is always a “seductive logic”, to any new regulation, the problem is cumulative: “All these good intentions can add up to a large expense, with suffocating effects.” Margaret Thatcher used the words of the Prayer Book to warn that regulations should not “be taken in hand, unadvisedly, lightly, or wantonly.”
David Cameron understands these points and the latest official estimate is that regulation has been cut by £1.5 billion a year. In fact, British businesses are more regulated now than they have ever been. Rather than cutting red tape, new analysis shows that the Coalition Government has increased it by at least £3.1 billion. This is a conservative estimate. The real burden is certainly larger but it is impossible to tell because the Government’s presentation of its figures is opaque. For the first two and a half years, for example, it simply ignored the cost of European regulations altogether. These figures are now published but they do are not included in the “official” total.
The Government claims as its biggest deregulatory success an accounting adjustment made by the Department of Work and Pensions to the way that private pension providers have to account for inflation. This technical change makes no difference whatsoever to the actual level of regulation pension providers must follow but it “saves” a notional £3.3 billion, more than ten times the size of the Government’s next biggest deregulation saving. Yet on its own rules, inflation-related changes of this kind must not be counted in the measurement of regulation.
It would be wrong to conclude that nothing has changed for the better. In fact, it is probably fair to say that the Government has been more thoroughgoing than any of its predecessors in seeking to reduce both the flow of new regulation and the stock of existing regulation. Particular praise must go to Oliver Letwin, whose forensic cross-examination of civil servants at his “Star Chamber” meetings has become the stuff of legend within Whitehall. Officials are now wary before proposing new regulations. The Prime Minister can take some satisfaction in what amounts to a real change of culture.
The truth is governments have always found it easier to impose rules on others than to stick to the rules they set for themselves. Thus the Prime Minister said he would cut all regulation – no ifs, no buts – but his Government turned a blind eye to the stream of red tape coming from the European Commission. The small business owner doesn’t care whether their regulation comes from Westminster or Brussels, they just want less of it. The EU itself says it is responsible for between one-third and one-half of the burden on European businesses.
What the Prime Minister has discovered is that deregulation is difficult. In 2011 he wrote “it is hard to believe that we need government regulations on issues such as ice cream van musical jingles,” yet three years later those regulations remain in force. Indeed, by tweaking the regulations to bring them up to date the government has added a further £120,000 of transitional costs on ice cream vendors.
While the Prime Minister has failed in his own terms, whoever wins the next election will inherit the best machinery for monitoring, measuring and controlling regulation that the UK has yet seen. The job is to see the deregulatory task through to its logical conclusion. The next government should count the cost of every regulation, whether generated on the Continent or in the UK.
It should include regulations in every sector, even those such as financial services which are going through a heavy increase in regulation (in the hope of preventing another damaging economic crisis). It should resist any temptation to bend the rules in order to present its achievements as stronger than they actually are. The task is not easy but it can be achieved. If so, Britain will take a very big step indeed towards the modern, high growth economy that all political parties should want to deliver.