Rules are there for a reason
Conservative plans to cut regulation would do more harm than good
John Redwood’s strategy to improve Britain’s economic competitiveness was
unveiled in mid-August following a carefully constructed week of media hype.
Among the main proposals was an abolition of the minimum wage, an end to
inheritance tax, and a new commitment to liberating business from burdensome
bureaucracy. Large-scale deregulation of the economy is essential if Britain is
to become more prosperous, it argues.
It is a prospectus heavily tainted by traditional Tory thinking, but not too
much by current evidence. The UK already has the second-least regulated economy
of OECD nations; while we cannot be sure of the economic effects of deregulation
we can be certain that bad employers would exploit any move towards further
deregulation, worsening the position of the most disadvantaged workers.
The OECD has made clear in its report Going for Growth 2007 that the policy
priorities for the UK are the reform of incapacity benefit, tackling basic
skills problems, strengthening incentives for lone parents to return to work,
investing in infrastructure and improving public service efficiency.
The deregulatory agenda has reached the end of the road. Other policy
instruments must be used if the UK is to face the challenge of intensifying
competition and rising skill levels in China and India.
Most seriously, the proposals to withdraw from some key elements of European
social policy (such as the working time directive) are not consistent with the
UK’s continued membership of the EU. Leaving the single market would damage
British business. This would more than outweigh the supposed benefits of tearing
up regulations.
Here in the UK, we have low taxes, a low level of labour market regulation,
liberal product market regulation and an open regulatory regime for utilities
and other services. Economic problems cannot be laid at the door of the
‘growing’ burden of regulation.
It is important for regulation to be well designed and for compliance to be made
easier, just as it is important for government to offer clear and
straightforward information and advice on the implementation of regulations. We
need an agenda for better regulation, not a policy derived from the highly
ideological belief that all regulatory interventions damage the perfection of
market processes.
Redwood’s proposals tilt the balance too far in the direction of the bad
employer and remove necessary protection from the most vulnerable.
David Coats is assistant director of policy at The Work Foundation