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Libertarians rejoice. While Elon Musk, tech entrepreneur and governmental efficiency tsar, is ripping up the tyranny of bureaucracy in the US, Britain is shuffling ahead with its own bid to cut red tape.
British quangos have a tendency to breed, so trimming has bipartisan appeal; the governing Labour party’s coming audit of some 130 regulators follows multiple efforts by previous Conservative governments.
Regulation is intended to deliver benefits, of course. And its growth to some extent reflects the changing nature of the state, from an entity that runs businesses to one that directs companies to do so in a way that benefits society.
But overregulation puts a brake on growth and stifles innovation. Fret not: the UK has two watchdogs, the Regulatory Horizons Council and the Regulatory Innovation Office, to address that very issue.
Quantifying the net burden of regulation to business, netting off costs and benefits, is by definition guesswork. There are one-off implementation costs — new rules require staff training, say, or new systems. Others bring an ongoing burden, such as rises in the minimum wage.
Government, diligently ordering and scouring so-called impact assessments, doesn’t make the task much easier. These documents are themselves replete with errors and lack standardisation. And regulators tend to find that the net cost of many measures is not far off zero.
Having ploughed through these IAs, the Centre of Policy Studies calculated that regulations implemented in the decade to 2019 imposed £35bn of gross annual costs. Adding in one-off transition costs, CPS says, gives an annual net burden of £6bn.
Other metrics have themselves proved shortlived. The World Bank, which ranked the UK eighth in terms of ease of doing business in 2020, subsequently suspended the series due to data irregularities. The British Chambers of Commerce jettisoned its “burdens barometer” for reasons that are unclear, but in 2010 it tallied £88bn, or £133bn in today’s money.
Either way, chancellor Rachel Reeves’ proposed audit is the smart starting point. Regulators delivering value for money, or impact in bureaucratic speak, can also foster growth. The objective should be to move fast without breaking things.
Many watchdogs will need to shape up before making the cut. Take Ofgem. The energy regulator blew through £190mn last year, largely on staff. It has also failed to avert the implosion of 29 energy suppliers that left customers shouldering £2.7bn, or £94 per household, politicians found. Ofwat, its water peer, has failed on so many scores it is hard to know where to start.
Andy Haldane — then an economist at the Bank of England — calculated that the ratio of regulators to actual workers in financial services stood at one to 300 in 2011. For all the quango bashing that ensued, that has roughly quadrupled, reckons the CPS. Not the type of growth Reeves is chasing.
https://www.ft.com/content/926eb25a-4aef-446b-80d4-c1104c799984
