Is red tape killing the recovery? Probably not, no

The idea that regulation is the problem is simplistic, overstated, and misapplied.

The argument goes like this: Our wealth creators are chomping at the bit to hire more people, produce more output, and sell more stuff. The only problem is that nasty government regulations are stopping them from doing it. Scrap those regulations, and bust turns to boom!

It's an appealing argument to many in the Conservative party, because it has the side effect of shifting the blame for slow growth from macroeconomic policies—particularly the historic failure of austerity. It also lets Tories express sympathy with the aims of policies like a minimum wage, health and safety regulations, or employment protections, without actually committing to keep them.

Small wonder that Conservatives as diverse as Louise Mensch, party donor Adrian Beecroft and the Institute of Directors think-tank have all expressed a desire to slash "red tape", particularly when it comes in the form of regulations protecting employees against their bosses.

But their starting premise is wrong. Business executives—the archetypal "wealth creators" if any are—aren't chomping at the bit to deregulate. In fact, they're far more concerned about their inability to borrow and the difficulty they have paying taxes, as they tell the World Economic Forum:

It's not just big businesses. In August 2012 the Department for Business, Enterprise and Skills asked 500 heads of small and medium sized enterprises about what they considered the main obstacle to success. “The state of the economy” was the biggest issue, listed by 45 per cent and “obtaining finance” was next, mentioned by 12 per cent. After this came taxation, cashflow, competition and regulations—just 6 per cent listed regulations as their main concern.

In Britain, part of the reason businesses don't care about red tape is that it's all part of the level playing field. The minimum wage doesn't hurt small businesses if all their competitors have to pay it as well. But, as Louise Mensch points out, there's the international context to take into account as well:

"The left think they're helping working people by providing more rights", she told the Observer in 2011. "But all that actually happens is you create poverty and despair, because jobs go to your competitors who have fewer rights for workers."

In fact, you have to look hard to find competitors to Britain who have fewer rights for workers. By international standards, the UK is not heavily regulated at all. In fact, when the OECD assessed the strength of employment protections across all its member nations, the UK was third from the bottom. Apart from the US and Canada, we have the least employment red tape in the developed world:

And when we look at the protections workers have against unfair dismissal – a specific protection attacked by Adrian Beecroft’s 2011 report on employment law – the UK is even closer to being the “freest” nation in the world. Only the US has fewer protections than us:

But the most important aspect of regulations is frequently missed in discussions of whether they hurt businesses: regulations have direct benefits. It's a point made alarmingly infrequently in a climate where the burdens of regulations are brought up on a monthly basis.

For instance, the minimum wage has costs—to businesses, which have to pay higher wages, but also theoretically to workers, who may find that they aren't employable for that much. The minimum wage also has benefits. It boosts the income of the lowest paid and as such is a very effective way to boost aggregate demand. It can also increase productivity in a number of ways.

None of this should obscure the most important point: the poorest paid people in society suddenly have more money. That's not a by-product; it's the entire aim. And discussing what businesses think about the burden without acknowledging that benefit will always result in a skewed conclusion.

For more, take a look at our article produced with nef and the Tax Justice Network as part of their "Mythbusters" series, addressing the myth that "red tape" is preventing the recovery.

Some red tape. Photograph: Getty Images

Richard Exell is a senior policy officer at the TUC and Alex Hern is the New Statesman's economics reporter.

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.