Regulate to accumulate
Deregulation is the wrong approach - better regulation can drive growth AND fight inequality
On Friday we and Unchecked UK published a report, Fair Rules, Fair Growth, arguing that a robust regulatory system should be deployed as a “lever” for the government’s plan for national renewal.
The report was covered in the New Statesman (substack version here). It recommends replacing the existing ‘Growth Duty’ on regulators with a ‘Fair Growth Duty’ that will drive inclusive growth while promoting opportunity, improving the country’s health, promoting safer streets and achieving net zero. It also argues for investing in a stronger regulatory system, based on a recognition that an ambitious, well-designed and well-resourced regulatory system is an enabler of fair growth. The report was accompanied by an open letter to the PM, signed by a range of former regulators, politicians and business people.
You can read the report online or download a PDF version. Please share it on Bluesky or LinkedIn if you think that your network might find it of interest.
A version of the article below, introducing some of the main themes in the report, was published in The Big Issue on 14 February.
The mantra from the government is grow, baby, grow. Economic growth is being presented as the absolute priority, without which we cannot afford to improve public services and living standards. Growing the economy before net zero, before levelling up opportunities, before rescuing the NHS.
There’s some logic to this. Of course we need to boost growth – albeit within sustainable limits. Public services need to be funded by tax revenues (unless you’re a modern monetary theorist, but that’s another story).
But the problem with this approach is twofold. Firstly, we live in a world of doom loops and vicious cycles. This means that it’s hard to deliver growth without first making progress in some of the areas that, according to the government, can only be tackled after we’ve started to grow the economy again.
There are many examples. A prosperous economy requires a healthy workforce, and yet poverty, poor quality work, inadequate housing and a creaking health service are harming the physical and mental health of millions of Britons. A productive economy depends on a society that offers everyone the opportunity to maximise their potential, and yet high levels of inequality deny these chances to millions more.
The second problem is that, for reasons that remain unclear, there has been a recent burst of rhetoric from the government about regulation being a barrier to growth. The Prime Minister has likened regulation to Japanese knotweed, and there has been much talk about the power of deregulation to unlock the potential of the British economy.
There is little substance behind this argument. As a report that we have published in collaboration with Unchecked UK outlines, a strong regulatory system is essential for delivering inclusive growth that makes everyone, not just a few, better off. It is the mechanism that ensures that we minimise the risks of the free market, while unleashing its potential to deliver greater prosperity and better living standards.
A well-designed and properly enforced regulatory system is key to the delivery of all five of the government’s missions, from growing our economy and breaking down barriers to opportunity to achieving our net zero target. Regulation is the foundation of fair markets, consumer protection, and investment in key areas such as clean energy, infrastructure, and skills development. These are the very building blocks of a fair and dynamic economy.
By contrast, deregulation puts people’s lives and livelihoods at risk, as we saw in the Grenfell Tower tragedy and the 2008 financial crash; the only beneficiaries are those who are prepared to put profits ahead of people.
The government does recognise this. The draft Employment Right Bill is predicated on the notion that protecting workers’ rights is not just good for the workers in question, but also benefits employers, and supports a stronger economy for all of us. A majority of businesses agree, and so do the public.
As many experts have pointed out in recent weeks, the government lacks both a unifying vision and a coherent theory for how it can achieve economic growth. This void is filled by those with the loudest voices – the people with an interest in maintaining the status quo. The false narrative that they push is the idea that inequality is an inevitable side-effect of economic growth, and that regulation is a barrier to it. In fact, the opposite is true. Decent regulation supports growth, and high levels of inequality undermine it.
"Decent regulation supports growth" - there are few (including the current government) who would disagree with this, it's more or less tautological (unless you're a bona fide libertarian). But it's much harder to say what "decent regulation" means - there's almost certainly no useful general answer, it depends to a large degree on the specific issue at hand.
It's hard to know what substance there is behind the anti-regulation government rhetoric (probably none), but it's legitimate for government to ask whether the current motley crew of regulators does a good job of making these judgements.
I can agree with you in parts here. But..
Nothing wrong with a strong regulatory system, as long it’s not the wrong regulatory system. Governments (and by extension the governments governing those governments) just tend to get it all wrong too many times.
You’re falling into the ‘Growth Trap’ too. Just like this government is doing. And the last one.
The mantra needs to change from ‘Just grow at all costs’ , to ‘just keep improving productivity’ . The latter will deliver growth, In Time. The former mantra leads to poor policy trickling down from the top.
This ‘Grow baby Grow’ illusion is incompatible with most traditional socialist policies. However hard Labour tries to pretend it is sponsoring growth, it can’t. Not without breaking down. Which it will.
If you want growth, you have to let business decide what is best for it. This does NOT mean low wages or poor working practices. That makes no sense to them. But it does require a government not pretending to be ‘in support of the workers’ when the reality is the reverse.
If the country wants growth, it will allow business to hire the people it needs, from wherever they will come from. End of.