UK hunt for growth turns to recurring red tape fantasy

In her Mansion House speech in November, Rachel Reeves declared: "The UK has been regulating for risk, but not regulating for growth." At the time, given it was an address to the City, her remark was primarily taken as focusing on the present financial watchdogs. Which indeed is what Reeves herself implied by dwelling on the aftermath of the 2008 banking crash. "It was right that successive governments made regulatory changes after the global financial crisis to ensure that regulation kept pace with the global economy of the time but it is important that we learn the lessons of the past. These changes have resulted in a system which sought to eliminate risk-taking. That has gone too far and, in places, it has had unintended consequences that we must now address ." The Chancellor did say, though: "We need economic reform to unlock the full growth potential of the British economy. Our approach to regulation is a critical part of that. As the Prime Minister has already set out, the key test for regulation is whether it will make our economy more dynamic and more competitive. So we will review the strategic guidance that we give to the [Competition and Markets Authority] and to other major regulators to underline the importance of growth." After that there was scarcely much mention, as instead, Reeves and her colleagues appeared to become ground down in resisting domestic and international economic blows. Then last week, representatives of the British Chambers of Commerce assembled for a meeting with Lord Livermore, Financial Secretary to the Treasury. They were taken aback to be joined by Livermore’s boss. Reeves wanted to hear first-hand their woes and wishes. She’d done something similar with the Confederation of British Industry. It was an easing of the regulatory burden they desired. They wanted a new approach, one that was less pernickety and obstructive, and would drive business and with that, growth. This week, Reeves will "haul in" leading watchdog heads to tell them: "You’ve got to get serious about growth." Those facing her will be the Competition and Markets Authority, Ofcom, Ofgem, the Environment Agency and the Financial Conduct Authority. Next week, it will be the turn of other agencies. They will be instructed: "I want your ideas about how you’re going to stop regulating for risk and go for growth instead." To the cynical eye, it’s reminiscent of when Rishi Sunak took charge and sent a memo round all the Whitehall departments asking for their suggestions as to how to grow the economy. He added a qualification, that they were not allowed to use anything from Liz Truss, his predecessor as prime minister. Britain, it seems, is increasingly reliant upon officials coming up with proposals rather than those who actually lead the country. Still, Reeves has set her course . It is evident, too, in PM Keir Starmer ’s announcement concerning the adoption of AI. Out will go caution and in its place will be a decision to back the new technology wholesale, including the fast-tracking of planning permissions for AI businesses. The scale of the problem is evident, however, in a paper from the think tank Policy Exchange. The Rise of the Regulators , published six weeks ago, contains a foreword from Lord Sedwill, a former cabinet secretary. It argues that the UK’s regulatory framework is being driven by what he calls a "risk aversion ratchet", which incentivises an ever-growing burden of rules and requirements. "The ratchet is the product of a political culture which is increasingly safetyist, a bureaucracy in which it is remarkably easy to generate new regulations and a complete lack of incentives to remove redundant or pernicious regulations from the rulebook. And it makes lessening the regulatory burden extremely hard for any government." This is the issue. Saying one thing and putting it into practice is not always so easy, not where a long-established machine with a set way of working is concerned. President-elect Donald Trump may find the same as he attempts to dismantle bureaucracy in the US (there is no doubt that the arrival of the free-speaking, buccaneering next president has galvanised thinking in the US and across the world). For every rule, no matter how petty, there will be someone defending it. Policy Exchange found that Whitehall regulators have almost doubled the number of staff they employ over the past decade. Head-counts at seven of the top watchdogs have increased by 84 per cent from 2013-14. The Financial Reporting Council boosted its roll by 256 per cent between 2013-14 and 2023-24. Over the same period, the Financial Conduct Authority saw a rise of 117 per cent and Ofcom’s tally went up by 88 per cent. The Competition and Markets Authority, Food Standards Agency, Natural England and the Care Quality Commission experienced similar rises. Policy Exchange says complying with red tape costs the UK economy £70 billion ($85.33 billion) a year, or between 3 per cent and 4 per cent of GDP. It calls for the slashing of regulations by 25 per cent. This would be accompanied by a comprehensive regulations register – the mind boggles as to its size – together with a one-in, two-out condition for the introduction of new rules. Yes, yes and yes. But it’s hard to avoid the sense of deja vu. In 1992, Michael Heseltine as Trade Secretary was tasked with "hacking back the jungle of red tape". Which begs the question, if it was a jungle back then, what is it now? Heseltine promised a "bonfire" of regulations. That identical word was used by David Cameron. In 2015, Cameron replaced the then one-in, two-out rule – see, it existed a decade ago – with a one-in, three-out measure, which meant for every pound of new regulatory burden introduced, government departments had to reduce burden elsewhere by at least three times that amount. Liz Truss also seized on the same description, saying "a red tape bonfire will encourage business investment and boost growth". Not to be outdone, Starmer has said the same. There is another word that gives lie to their bravado and highlights the practical difficulty, certainly in Britain, also involving a fire, albeit one that was terrible: Grenfell. The victims of that disaster died because insufficient building regulations were in place and the ones that were there were not properly enforced. Possibly, that applies as well to the current wildfires in Los Angeles. The city’s mayoral authority might have diverted cash earmarked for the fire department but that is because it could, there was nothing in law that said it couldn’t. That’s speculation at this stage, admittedly, but it illustrates what Trump may discover and where this debate could head in the coming months and years. We wish it to happen, we really do. But we live in a lawyered-up age in which one misjudged step can result in a heavy price. Hopefully, Reeves and Starmer will get somewhere, there will be tangible cuts and, with them, savings and the much sought-after growth. The ratchet will be loosened. Do not hold your breath. Remember Heseltine. When was it again? 1992.