“Every regulator, it doesn’t matter what sector, has an element to play by tearing down the regulatory obstacles that maintain again development,” stated Rachel Reeves, the chancellor, after summoning the overseers of the railways, aviation, water and power industries and extra for a pow-wow at No 11. You’d nearly suppose the UK could be reworked right into a high-growth paradise if solely these regulatory plodders would permit corporations to embrace risk-taking.
The truth, sadly, is extra nuanced. First, most of those regulators – the likes of the Competitors and Markets Authority, Ofcom, Ofwat, Ofgem, the Setting Company and the Civil Aviation Authority – have had a secondary “development responsibility” since 2017. The political urging to take the duty extra severely could also be louder lately, however the duties themselves haven’t modified.
Second, it’s too simplistic to suppose that sturdy regulation impedes development. Usually, agency and predictable regulation, coupled with the rule of regulation, is nice for attracting funding. Basically, worldwide buyers want excessive regulatory requirements over a free-for-all that invitations fraud or worse.
Third, so long as regulators’ main responsibility is to guard customers and the general public, they need to obey. If parliament reversed the order to prioritise development, there could be uproar. Monetary companies companies could grumble in regards to the Monetary Conduct Authority’s “shopper responsibility” rule that requires clients’ wants to come back first, however the voters in all probability prefer it. It’s a high-level safety towards being ripped off by an trade that, let’s face it, has not all the time lined itself in glory. Equally, we’d certainly all want the Setting Company to focus on enforcement over development.
Fourth, if Reeves really desires to vary the regulatory mindset, she could need to be exact along with her directions. Issuing remit letters to encourage extra danger taking is okay as far it goes. However, if the chancellor desires the UK to embrace, say, a crypto lash-up, she ought to say so. Within the absence of an order from the federal government, you possibly can’t blame regulators for being cautious – they’ll be those who get it within the neck if every little thing goes horribly unsuitable.
None of which is to disclaim there may be scope for regulators to filter litter or get out of the best way typically. Reeves, in her Mansion Home speech final yr, stated “components” of the Senior Managers and Certification Regime, a post-banking disaster reform to make prime bankers accountable for his or her conduct, had turn out to be “overly expensive and administratively burdensome”. That could be the case. However since she additionally stated the regime had “helped to enhance requirements and accountability”, she’s presumably not proposing to tear it up wholesale. Any reform feels like a tweak – possibly a logical one – however not a gamechanger, growth-wise.
Equally, the Monetary Reporting Council, the audit watchdog, has rightly been praised for dropping sure reforms that may have elevated reporting necessities on London-listed corporations in environmental and social areas. The necessities have been duplicated elsewhere, it argued, and the precedence was to harden the essential stuff, corresponding to inner audit controls. Very wise – however, once more, the appliance of some frequent sense and proportionality shouldn’t be more likely to be transformative for development.
Corporations prefer to grumble about regulators, after all, and there may be all the time room for enchancment. It’s simply that the large stuff for development is nearer to the federal government: planning reform, the price of power for trade and customers, the tax regime, the availability of expert labour, enterprise charges, housebuilding and so forth. There’s no nice hurt in giving regulators a performative tickle, however, sorry, they don’t have the facility to conjure a 2% development charge out of skinny air.
