Past governments and the present government speak the language of deregulation, but end up regulating more.
Opponents always try to blame deregulators for whatever ills in society regulation was trying to cure. Sensible deregulators no more want fraud, credit bubbles, unsafe factories or bad employers than anyone else.
There are two main issues. How effective is each regulation – does it really reduce the incidence of the ill you dislike? Is the cumulative burden of all the regulation tolerable, or does the burden in turn create worse ills like too few jobs and lower living standards?
My main argument has been countering Labour’s persistent attacks on me for allegedly favouring less banking regulation prior to the Credit Crunch. What the study I chaired actually said was we needed tougher regulation of cash and capital in banks, as credit was too easy. Events proved that right. We also said that Labour’s expensive and complex mortgage regulation would not work. It clearly failed to keep the mortgage banks safe. No sooner had Labour regulated, than for the first time in a century mortgage banks were at risk. This is a good illustration that you need to know what regulation is for, and how to make it effective. You can have too much of the wrong type of regulation.
Today the total costs of regulation on British business are high. It is not all necessary and it is not all doing a good job. I have sent numerous proposals to the government to take action to sort this out. I am told that the latest exercise will produce results.
One simple example of what could be done is the question of anti money laundering. The aim is a sensible one. The means are bureaucratic and not convincing. The system assumes that if every bank and financial business handling money demands a passport and utility bill proof of the person’s identity we will be spared money laundering. It is an odd idea, as money launderers presumably have passports and utility bills. If they do not, they would be the kind of people who could forge suitable documents for their purpose.
A simple change would cut down the paperchase and record keeping. Surely any business in the UK receiving funds from a major UK, EU or US regulated bank could be spared having to make checks. They should be able to rely on the checks made by the bank which first took on the deposit. This would remove the overwhelming majority of all the checks in the current system, and allow people to concentrate on the cases where money laundering is more likely – where money comes in in suitcases or cheques drawn on dodgy banks in fringe jurisdictions.
Deregulation is the tax cut that can save the government money. We need a strong deregulation policy – not to make the world less safe, but to make UK businesses more competitive. So far this government has put in many more regulations than it has repealed. It needs to get better at confining regulation to the best of causes, and ensuring that the regulation they do put in actually works. They will also discover that the origin of much of the needless, expensive and ineffective regulation is the EU where they will have their work cut out to reduce it.