Politicians must take the blame for the failure of the deregulation agenda

ConservativeHome by Fred de Fossard

Fred de Fossard is a policy and strategy consultant. He served as Special Adviser to Jacob Rees-Mogg from 2020 to 2022, covering Brexit Opportunities, regulatory reform, and legislation.

Last Wednesday, the newest group of Conservative MPs was established: the Growth Group. Their mission is to champion supply-side reforms and deregulation to restore dynamism, competitiveness, and growth to the economy.

This group is long overdue, but it will have quite a challenge on its hands.

Within a couple of days of assuming office, Rishi Sunak’s spokesman confirmed that a package of deregulatory reforms being prepared by Liz Truss was to be shelved. This was followed by the abolition of the energy supply taskforce, the cancellation of housebuilding targets in the face of backbench rebellion, and swirling rumours about plans to dilute the Retained EU Law Bill, which will enable the rapid removal of thousands of EU regulations.

Despite the progress of some commendable reforms since 2019, such as the Genetic Technology Bill, the overall picture is depressing, with the United Kingdom becoming an increasingly expensive place to live and to do business.

The deregulation we have seen has either been piecemeal – such as the tweaks to HGV regulations made by Grant Shapps to ease the lorry driver shortage in 2021 – or in response to emergencies, like the rapid procurement and approval of vaccines and PPE in 2020.

Neither of these have led to lasting changes in how the government operates. Along with the demise of Truss’ tax-cutting plans, it appears that economic and regulatory reform is all but dead under this Government.

However, it would be wrong to lay this at the feet of one Prime Minister alone. One of the stories of the last decade of Tory rule has been the failure of regulatory reform.

Take childcare, which is incredibly expensive in England, in part thanks to the cost of regulations which do not reflect real risk or real-world practice. The first attempt to cut costs through liberalised regulations was made by Truss, then an education minister, in 2013; they were killed by Nick Clegg, then Deputy Prime Minister.

Since then, the Government has gone in circles, floating an almost identical proposal to loosen the ratios of carers to children last year, which has since been cancelled, or deprioritised, as the government often says.

It is notable how many deregulatory drives have failed. Some have actually managed to increase regulations in ways which would be comical, were the overall economic picture not so dire.

Under the “one in, one out” system of regulatory reform attempted in the 2010s, an expensive increase in the minimum wage was supposedly balanced out by a liberalisation in fishing rights for sturgeon. When the plastic bag charge was introduced in 2015, civil servants apparently justified this as a deregulatory measure – as it meant businesses were no longer required to offer carrier bags free of charge.

This failure has drawn many commentators to say that the Tory interest in reducing the size of the state is misguided or impossible in the modern era. I disagree. Supply-side reforms are one of the surest weapons against inflation to increase growth, competition and prosperity.

There is huge resistance to deregulation whenever it is mooted, often stoked by incumbent businesses with a powerful market position which they do not want disrupted, or from government officials who implement these regulations.

The British chemicals industry, for example, campaigned against the European Union’s introduction of its restrictive REACH regulations, but did an about turn after their introduction, for once they have spent the money complying with these regulations, they have an interest in keeping them in place, to reduce competition from new businesses.

The same is the case with regulations around selling junk food in supermarkets. Supermarkets which begrudgingly paid to reorganise their shops subsequently complained about the possibility of these regulations being removed.

The voice of the competitor or the consumer – suffering worse service, fewer products, or higher costs -is rarely heard. Much of the fault for this unfortunately lies with politicians themselves, who have often failed to articulate both the problem they wish to solve via deregulation and the way it will benefit Conservative voters and wider society, leaving their ideas vulnerable to attack as a threat to standards, safety, or welfare.

The tragedy is that, with inflation stubbornly high and the regulatory state growing, economic growth – the only way of improving our living standards – remains a distant prospect, suffocated by cartels, impact assessments, and legal challenges.

The problem is ultimately one of policy and legislation, and its effects are far reaching, especially in infrastructure and housing.

As Sam Dumitriu from Britain Remade recently observed, thanks to outdated national planning policies and political deadlock, infrastructure – like energy-generation, roads and bridges – is not being built, and what is built is more expensive than ever before and subject to ever more active judicial review.

As such, new energy projects take over a decade to be plugged to the National Grid, leading to manufacturers reconsidering their investments in the UK.

Meanwhile, hundreds of thousands of homes have had their planning permission refused following an European ruling in 2018 on nutrient levels in water in the Netherlands. Outside the EU, the Government can now change this by amending the Habitats Regulations… yet it has not done so hitherto.

However, all may not be lost. The Cabinet is said to be hosting a series of sessions focused specifically on deregulation in the coming weeks, with each department presenting its priorities for reform. It remains to be seen what will be proposed, but the Prime Minister has been clear that he wants regulatory reform to make the UK a better place to do business and invest.

Ministers must challenge the regulatory instincts of their departments and focus aggressively on British competitiveness, especially on the cost and supply of energy and commercial space, which dictate so many companies’ decisions on where to invest.

Without this, any hope of Conservative economic reform will be lost, and the trickle of businesses and people leaving Britain for comparatively cheaper, freer and richer countries like Australia or the United States will become a flood.

This should sharpen the minds of ministers and the Conservative Growth Group alike. It is not just their current voters they need to worry about, but also the next generation of potential Conservatives, who may not just abandon the party altogether, but the country too.