Morning Call: Who scotches the watchmen?
Labour’s deregulation plan is a risk to the economy.
Good morning, Will here. The Labour government seems to view red tape as a barrier to economic growth. But is it?
The Business Secretary, Jonathan Reynolds, gave a speech yesterday at a Brand Experience Space, which is apparently a sort of very large shop, in which he said he was hearing “day in, day out” from business leaders who told him that “regulation and regulators are too cumbersome”. His answer to them was to “watch this space” for “wider regulatory reform over the coming weeks and months”.
This echoed the statement given by Rachel Reeves following yesterday’s wafer-thin portion of nominal GDP growth, in which she too committed to “removing the barriers that get in the way of businesses”.
Not everyone thinks deregulation is to be celebrated, however. On Tuesday evening the governor of the Bank of England, Andrew Bailey, gave a speech in which he observed that “there is a reaction taking place against regulation”, and it is one with which he, as head of the institution responsible for financial stability, is evidently not comfortable. He invoked the economist Hyman Minsky, whose warnings about the financial deregulation of the 1980s were later confirmed by the subprime mortgage crisis.
Bailey finished by reminding his audience that the slow economic growth we’ve had since 2008 is not because we’ve had too much regulation, but because we didn’t have enough. The failure to regulate financial markets in the run-up to 2008 contributed to a crisis for which we are still paying. “There is no trade-off between economic growth and financial stability,” he warned. This is a pretty strident intervention from a person, and an institution, that does its best to keep out of politics.
Bailey is not alone in this. This morning, a group of 24 business leaders, investors and legal experts have written to Keir Starmer to warn that “crude deregulation has proven to be little more than fool’s gold, compounding inequalities and damaging our economy”. The signatories to the letter include the former business secretary Vince Cable, the former chair of the Environment Agency, Emma Howard Boyd, and the founders of British tech companies such as Photobox, AskmyGP and Exscientia.
The organisations behind the letter, Unchecked UK and the Fairness Foundation, have also produced a report which suggests the UK would have a better functioning labour market and a healthier economy if our regulators hadn’t already had their budgets slashed, losing on average 41 per cent of their funding in the decade from 2009.
What’s concerning about the government’s current position is that new technologies are opening up new opportunities for regulatory failure. One of the biggest questions for many British companies is whether the government is going to defend them from the wholesale appropriation of their work by American companies, which are devouring the intellectual property of businesses across the globe under the pretence that using other people’s work as “training data” for “AI” is somehow a different and more friendly kind of theft.
Reynolds’ speech wasn’t exactly reassuring on this. It was accompanied by a “strategic steer” issued to the competition regulator (the Competition and Markets Authority). American tech companies are probably already feeling a bit better about the CMA, given that its chair was removed last month and replaced with the former head of Amazon UK, Doug Gurr. Big Tech will also be pleased to read that one of the top priorities in yesterday’s instructions to the CMA is that the regulator should use the new powers conferred on it by last year’s Digital Markets, Competition and Consumers Act (DMCCA) “flexibly, proportionately and collaboratively to unlock opportunities for growth”.
When the DMCCA was introduced in May last year it was written to allow regulators to address the US companies that use their market power (which have what the act calls “strategic market status”) to dominate British companies. The implied subtext of yesterday’s “steer” is: we gave you a stick to use on Big Tech, but we’d rather you didn’t use it. That will be music to the ears of companies like, to pick a random example, Amazon.
Our government’s deregulatory agenda is of course dainty compared with the mass deletion of state apparatus happening across the Atlantic. It is understandable that the government might see this and be concerned that investment might head across the Atlantic, but of course it already does. One stock exchange in New York accounts for more investment than those of the UK, China, Japan, Europe and India combined.
It is worth considering whether the opportunity presented to the UK by the Doge-ification of the US economy is that a lot of companies over there might suddenly seek a more stable and properly regulated economy in which to invest. Let’s be very clear: the American government has just announced that it’s cool with companies doing bribery abroad. Unless you think the UK is going to deregulate more aggressively than that – and it obviously isn’t – then there is no way we’re going to compete in the libertarian-economy stakes. We might have more luck welcoming all the businesses that find themselves coping with the consequences of US deregulation than trying to put together a lukewarm copy of it.
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Reynolds. Kyle. Reeves. Phillipson. Et al.
Enough of your sophomoric political gaucheries!!
All of us who so badly wanted a Labour government are aghast as they fly unmoored & blind in their reality- (and morality-) free world.
What homework did these people do prior to taking office? What political (as opposed to electoral) tuition are they getting now?
The Red Tape syndrome.
This was the most regular excuse I heard over many years at a Business School. It seemed to stand for a grumble at all enemies of the entrepreneurial spirit. Things haven’t changed much.