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 Images
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The future of policing is still at risk even after George Osborne's U-Turn

The police have avoided the worst, but crime is changing and they cannot stand still. 

We will have to wait for the unofficial briefings and the ministerial memoirs to understand what role the tragic events in Paris had on the Chancellor’s decision to sustain the police budget in cash terms and increase it overall by the end of the parliament.  Higher projected tax revenues gave the Chancellor a surprising degree of fiscal flexibility, but the atrocities in Paris certainly pushed questions of policing and security to the top of the political agenda. For a police service expecting anything from a 20 to a 30 per cent cut in funding, fears reinforced by the apparent hard line the Chancellor took over the weekend, this reprieve is an almighty relief.  

So, what was announced?  The overall police budget will be protected in real terms (£900 million more in cash terms) up to 2019/20 with the following important caveats.  First, central government grant to forces will be reduced in cash terms by 2019/20, but forces will be able to bid into a new transformation fund designed to finance moves such as greater collaboration between forces.  In other words there is a cash frozen budget (given important assumptions about council tax) eaten away by inflation and therefore requiring further efficiencies and service redesign.

Second, the flat cash budget for forces assumes increases in the police element of the council tax. Here, there is an interesting new flexibility for Police and Crime Commissioners.  One interpretation is that instead of precept increases being capped at 2%, they will be capped at £12 million, although we need further detail to be certain.  This may mean that forces which currently raise relatively small cash amounts from their precept will be able to raise considerably more if Police and Crime Commissioners have the courage to put up taxes.  

With those caveats, however, this is clearly a much better deal for policing than most commentators (myself included) predicted.  There will be less pressure to reduce officer numbers. Neighbourhood policing, previously under real threat, is likely to remain an important component of the policing model in England and Wales.  This is good news.

However, the police service should not use this financial reprieve as an excuse to duck important reforms.  The reforms that the police have already planned should continue, with any savings reinvested in an improved and more effective service.

It would be a retrograde step for candidates in the 2016 PCC elections to start pledging (as I am certain many will) to ‘protect officer numbers’.  We still need to rebalance the police workforce.   We need more staff with the kind of digital skills required to tackle cybercrime.  We need more crime analysts to help deploy police resources more effectively.  Blanket commitments to maintain officer numbers will get in the way of important reforms.

The argument for inter-force collaboration and, indeed, force mergers does not go away. The new top sliced transformation fund is designed in part to facilitate collaboration, but the fact remains that a 43 force structure no longer makes sense in operational or financial terms.

The police still have to adapt to a changing world. Falling levels of traditional crime and the explosion in online crime, particularly fraud and hacking, means we need an entirely different kind of police service.  Many of the pressures the police experience from non-crime demand will not go away. Big cuts to local government funding and the wider criminal justice system mean we need to reorganise the public service frontline to deal with problems such as high reoffending rates, child safeguarding and rising levels of mental illness.

Before yesterday I thought policing faced an existential moment and I stand by that. While the service has now secured significant financial breathing space, it still needs to adapt to an increasingly complex world. 

Rick Muir is director of the Police Foundation