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.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.