Every government promises to cut red tape but ends up adding more. The only way to break the cycle is to stop listening to nice sounding arguments, says Matthew Lesh
Google’s CEO Eric Schmidt did not mince words at this week’s International Investment Summit. “Maybe you need a minister of anti-regulation?” Schmidt said to Prime Minister Keir Starmer on stage, “the cost of capital and the delay is killing you”. Starmer even agreed in his keynote speech, promising to “rip out the bureaucracy that blocks investment” to galvanise growth.
But, for those whose memory is longer than a goldfish, this rhetoric sounds all too familiar.
Just last November, then-Prime Minister Rishi Sunak committed to “simpler regulation” to support investment in a major speech on the economy. In 2021, Boris Johnson told the CBI that the “government sometimes should get out of your hair,” amid remarks about Peppa Pig epitomising British creativity. Not to mention David Cameron’s red tape challenge in 2011 or Tony Blair’s ordering every government department to cut regulations by one-quarter in 2006.
A regulatory merry-go-round
So then, why do politicians keep promising to cut red tape, yet businesses like Google only find the burdens growing? Are we stuck on the regulatory merry-go-round?
The early responses to the new government are telling. This week, the Royal Society for the Protection of Birds (RSPB) blasted the Prime Minister’s speech as “unsettling… for those who love and value nature”. Technology Secretary Peter Kyle was forced to deny that the UK will lower standards in a radio interview.
As the specific proposals come to light, we can expect these pro-regulation voices to grow louder. Campaigners will launch emotive campaigns against eliminating burdensome rules while continuing to advocate for new ones, from the environment to union rights and fire safety.
Most of their proposals sound sensible in isolation. Who doesn’t think nature should be protected? Why shouldn’t all buildings have two staircases? But that logic fails to account for their actual costs. Taken together, the regulations push up prices for consumers, have delayed projects and led businesses to withhold investment, stalling Britain’s economic growth. There’s a trade-off when you try to regulate, and sometimes the benefits just do not outweigh the costs.
Even the new Labour government — which now talks about cutting red tape to get essential buildings — helped block reforms to ‘nutrient neutrality’ rules that hold up so many projects. They are also proposing several major new regulations, from a employment legislation and a football regulator to stringent renters rules and Martyn’s Law – which requires venues to prepare costly anti-terrorism plans. This means pubs, churches, and village halls training staff to counter the vanishingly unlikely event of a terror attack.
We have to be honest that getting Britain building and restoring our lost prosperity will involve difficult trade-offs. It’s not even just about limiting local ‘Nimby’ veto power, something this government appears willing to tackle; it’s the myriad of other rules that hold back projects.
Just take habitat regulations: well-meaning requirements to protect newts and conservation areas. The problem is not just that the rules explicitly prevent specific projects from going ahead; it’s that even when technically allowed within the rules, the process requires burdensome, lengthy, and expensive environmental assessments and consultation. Then, there are the legal costs and associated redesigns. The result of all these costs is that fewer projects, including green energy, are financially viable. The only winners are the lawyers.
The result of extra costs is that fewer projects, including green energy, are financially viable. The only winners are the lawyers.
The new government aspires to escape this trap, and the rhetoric has undoubtedly been heartening. But the early evidence is far from reassuring. Analysis from the campaigning group Britain Remade indicates that ministers have already delayed four in ten major infrastructure project decisions. This is even higher than under the previous government.
Ultimately, it will take more than just words to jumpstart Britain’s economy; it will involve structural changes to how the British state operates and a willingness to take on nice-sounding arguments.
Matthew Lesh is Country Manager at Freshwater Strategy and a Public Policy Fellow at the Institute of Economic Affairs