The government's promise to slash business regulations as part of its Budget strategy misses the point about what is holding back the UK economy, according to analysis of the government's approach to deregulation. Before becoming prime minister, Andy Burnham pledged to end 40 years of neoliberalism, yet the government continues to rely on the language of cutting red tape. Ahead of Chancellor John Healey's Budget address on Wednesday, the government issued a press release promising measures to slash the red tape it says is choking firms.
The phrase itself has a long political history. Named after the tape once used to tie up government bills and popularised by historian Thomas Carlyle, it became central to neoliberal economics under Margaret Thatcher and Ronald Reagan. Thatcher's successor John Major championed what Michael Heseltine famously called a bonfire of red tape. Even after Labour returned to power, Rachel Reeves used similarly stark language, referring to regulation as a boot on the neck of British business.
However, the focus on cutting regulations ignores several fundamental problems with this approach. First, good regulation is essential for markets to work well. Competition regimes and basic quality standards for food and medicines are necessary. Ironically, Labour has simultaneously adopted a strongly pro-regulation stance in the labour market through its Employment Rights Act, the most significant increase in workers' rights in a generation. This creates an inconsistency in the government's messaging on deregulation.
Second, the growth of regulation itself resulted from the spread of neoliberalism. As private utilities were created through privatisation, watchdog institutions became necessary to oversee the private sector. The water sector, privatised in 1989, is overseen by multiple agencies including Ofwat, the Drinking Water Inspectorate, the Environment Agency and the Consumer Council for Water. Yet none are responsible for drawing up a coherent plan for the sector as a whole. Mat Lawrence, director of thinktank Common Wealth, describes this as the regulatory state, where regulation now replaces services the state once provided directly.
Third, regulators themselves operate with stretched resources and are often unfairly labelled as blockers. Mike Clancy, general secretary of the Prospect union representing workers at many regulators, urged the government to stop attacking these often modestly paid staff who are trying to keep the public safe and protect the environment. Prospect has urged the government to abandon its pledge to cut the administrative burden of regulation by 25% by the end of the parliament, calling the target arbitrary and potentially counterproductive.
For savers, borrowers and businesses, the focus on deregulation may distract from the structural changes needed to improve economic performance, as addressing the real obstacles to growth requires more targeted intervention rather than blanket cuts to rules.