Unlock the editor’s summary for free
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
A cacophony of indignation has exploded in the demand of Rachel Reeves that regulators should do more to support the economy. Consumer groups fear loss of protections; Antitatopoopoolio lawyers murmur over monopolies; The government departments maneuvery to avoid cuts to the bodies that sponsor. Meanwhile, others have taken the opportunity to exhumar dark warnings on the light tactile regulation that fueled the flames of the 2008 accident.
The chancellor is right. The Light Touch regulation is not the current problem of Great Britain. In fact, regulation has been one of our few constantly reliable growth industries. There is no inherent tension between the economy and the intelligent regulation that avoids monopolies, maintains competitive markets and promotes capital formation. But in too many cases, we have something different: constantly changing rules that companies fight to keep up; complexity that spawn ranks of councils; and the inherent mission.
At this time, hundreds of sites with permission for high -height housing are empty, because the new building safety regulator is struggling to process them, eight years after the tragic fire of the Grenfell Tower. The financial behavior authority, which could not detect the Woodford scandal despite the warnings of former city minister Paul Myners, seems obsessed with imposing rules of diversity on companies, in a dim attempt to prevent “group thinking” . Whatever he thought about the CMA’s decision on the application of Microsoft to take care of a game company, the many months that happened to the duration was not impressive.
There is a lot of space to improve. But while exchanging a president (former Boston Consulting Group) on the other (former Amazon, former-Mckinsey) can bring a different culture to the CMA, it is not a lasting solution. While some of these bodies are failing demonstrably, most are as good as the Remit they gave them, the politicians who established them. The reason why the United Kingdom has the highest electricity prices in Europe, paralyzing manufacturers, is that ministers have long used energy regulation to promote their own environmental objectives.
Reeves’s instinct is that “balance has moved too far to regulate the risk.” This is partly due to Whitehall in itself is reluctant to risk. The officials, anxious for the withdrawal of decisions, tend to push too many to the extensive landscape of the bodies to the arms. The sponsor departments, in turn, are often reluctant to look too closely how they are working: do not make non -monitoring architecture, five -year reviews and impact evaluations. But ministers are also reluctant to risk; and especially prone to “something should be done.” The classic example was in 2000, when the response to the terrible railway accident of Hatfield was automobile. .
In 2015, when I worked at Downing Street, I was surprised to discover that a Whitehall department with which I was trying not even had a list of the regulations that you were responsible. I asked a main advisor what had happened with the “bonfire of the quangos” that George Osborne had launched five years before. Initially upset by my skepticism, he finally admitted that, although some incursions had been made, the system had retreated, and the result was less a bonfire than a small spark. In 2021, the Public Accounts Committee found that the expense of these agencies had been tripled since then; And Meg Hillier, the PAC labor chair, challenged the then government to explain why they settled in the first place.
Great Britain used to be really good in smart regulation. The creation of regulatory sand boxes, and the rapid deployment of the COVID-19 vaccine shows that we can still be. But the government also needs to ask some difficult questions about what the State is for and why we need bodies with confused levels of overlap. Do we really need as much ofgem and the national energy system operator? The Environment Agency and Natural England? When Great British Railways is launched, what will be the point of the railway and road office?
Sir Dieter Helm, Professor of Economic Policy at the University of Oxford, argues that the regulation of energy and water has become too complex. He has proposed that they are regulated as networks, through a single regulator. That would be a much more effective approach. And unless we can flex our regulatory systems to better carry out their objectives, how will Great Britain be agile enough to deal with advances in AI or synthetic drugs?
You don’t have to be a delusional libertarian to feel that Reeves is on the right path. The problem, of course, is the dissonance between what the Foreign Minister and the Secretary of Business says, and what the Government is really doing. It is establishing a lot of new bodies of arms length. And it is about to unleash an unprecedented set of new employment regulations, many of which will be unfeasible. Only a small clause in that package will make each pub subject to being sued by their staff and their clients, because their demand for employers to protect their employees from harassment will directly collide with the right of customers to freedom of expression.
There is still time to do this well. But politicians who want regulators to get less entrust should stop their own instincts to interfere. That is not easy.