At the end of last year, Katy Sawyer and I published a review of the Coalition Government’s progress on cutting red tape, The burden of regulation (2014). Given this was one of the few areas where Conservative and Liberal Democrat policy was in almost complete agreement before the 2010 General Election, we were interested to see what four-and-a-half years of joint work had achieved. The short answer was: “quite a lot”. The slightly longer answer was: “but nothing like as much as the Government has claimed”.
On the surface, the numbers for the 2010-15 Parliament look impressive. A whopping £3.3 billion cut in the first six months of the new regime, followed by a gentle downward trend for the rest of the period, marred only by the introduction of pensions auto-enrollment in mid-2012. Overall, a net saving to business of some £1.5 billion per annum.
In the course of our investigation, however, it became clear that the reality was somewhat less flattering. Various mistakes and omissions in the Government’s calculations (including, in one particularly egregious case, a failure to follow its own rules) meant that the apparent £1.5 billion saving was in fact an additional cost of £3.1 billion. Against an original ambition of removing at least £1 of regulation for every £1 it introduced, the Government had actually introduced at least £3.50 of regulation for every £1 it had taken away.
The great pity is that the Coalition’s failure to do its sums correctly masked an otherwise excellent deregulatory track record. Ministers from both parties had made Herculean efforts to both drain the stock of existing regulation and stem the flow of new regulation. “One-in, two-out”, the Red Tape Challenge, the Star Chamber and Sunset Clauses were all part of an arsenal designed to keep the red tape menace at bay.
That was then, this is now
So I was very interested to see that one of the first announcements made by the new Conservative majority government was a pledge by Business Secretary, Sajid Javid, to cut a further £10 billion of “burdensome red tape”. I’ve blogged previously about the shaky basis for this Blair-esque target but my interest was renewed by a second press release, published in July, which identified adult social care as one the Government’s five priority areas for deregulation.
This second announcement was made exactly a week after George Osborne’s eye-catching “National Minimum Wage” announcement in the Summer Budget. Hailed as a political masterstroke by observers on the left and right, it has proven somewhat less popular with employers who have to pick up the tab. And which group has been most vocal in expressing its anger? Step forward adult social care providers who claim that, at a stroke of his pen, the Chancellor has added £330 million to their paybill.
Putting to one side the question about whether care home workers are paid a decent wage – the answer is obvious – the question that should be occupying Mr Javid is whether this pay hike counts as new red tape. After all, £330 million represents a sizeable chunk of the £2 billion a year savings he has to find. And there are many other employers in the public, private and third sector who will also be caught by the Chancellor’s generosity with their money.
So, is it more red tape or not? The answer ought to be clear cut: Yes, when the Government chooses to increase the minimum wage above the level that would have been set by the independent Low Pay Commission then it is absolutely a net increase in regulation. Nor is this just my opinion. It is taken directly from the the rulebook that Mr Javid’s own department imposes right across Whitehall. And it is the approach that was taken by his predecessor, Vince Cable, when he chose to ignore the Low Pay Commission in 2013 (albeit very well hidden in a 38-page technical document).
What will be interesting to see is how things play out from here. As noted above, the previous Government had form for bending the rules when necessary. Will the new Government follow suit? It has already delayed the publication of the bi-annual “Statement of New Regulations” by more than three months without explanation. Will it perhaps take the opportunity presented in the forthcoming Enterprise Bill to amend the Small Business, Enterprise and Employment Act (itself less than six months old) to tweak what counts as a “qualifying regulatory provision”? Or will the Business Secretary take it on the chin and find even bigger regulatory savings elsewhere? Time will tell – and GovNum will be watching.