How to run a country: the burden of regulation

The call to action

The instruction from the Prime Minister, David Cameron, to his Ministerial team could not have been clearer:

“Today, there are over 21,000 statutory rules and regulations in force, and I want us to bring that number – and the burden it represents – down. Indeed, I want us to be the first government in modern history to leave office having reduced the overall burden of regulation, rather than increasing it.”

“This marks a change from the old ways of doing things – and its success will depend on you and your department being fully behind this approach. So this is not a polite request to ‘reduce regulation if you can,’ it is a change in approach that means Ministerial teams should see themselves personally accountable for the number of regulations contained within and coming out of departments, and the burden they impose. Be in no doubt: all those unnecessary rules that place ridiculous burdens on our businesses and on society – they must go, once and for all.”

These were not the words of a Conservative Prime Minister forcing through his agenda on an unwilling Coalition partner. Both the Conservative Party and the Liberal Democrats had made firm commitments to deregulate in their 2010 general election manifestos. In doing so, they were building on more than two decades of sustained regulatory activism – initially, a programme of “deregulation” under the Thatcher and Major administrations, followed by a programme of “better regulation” under the Blair and Brown administrations.

At first sight, this long-standing preoccupation with regulation is perplexing. After all, no government introduces a new regulation believing that, by doing so, it will make society worse. Yet successive regimes – of both the Left and the Right – have worried about the cumulative impact of regulation, particularly the impact on business. The approach taken by the Coalition Government has been twofold: with action not only to stem the “flow” of new regulation but also to reduce the “stock” of existing regulation.

The measure of success

In its latest self-assessment, published earlier this year, the Government reported that the sum total of its deregulatory programme to date has been to reduce the annual cost to business by £1.5 billion. In measuring its own performance, however, the Government has allowed itself some generous exemptions – simply ignoring the cost of any regulation relating to financial systemic risk and likewise ignoring all regulation originating in Europe. More controversially, the Government has broken its own rules in the calculation of its single largest regulatory “out”. Estimated at £3.3 billion, this single change is 11 times larger than the next biggest “out” and single-handedly pays for every single regulatory “in” recorded by the Government during its entire period in office.

Correcting these mistakes reveals that, instead of saving £1.5 billion, the Coalition Government has in fact increased the regulatory burden on business by at least £3.1 billion. Against an ambition of removing at least £1 of regulation for every £1 it introduces, the Government has actually introduced at least £3.50 of regulation for every £1 it has so far removed. The Prime Minister has comprehensively failed in his ambition to leave office with less regulation than he inherited.

Yet despite this failure, the Prime Minister must be congratulated for sheer determination of his Ministerial team to tackle over-regulation. It is probably fair to say that the Coalition Government has been more thoroughgoing than any of its predecessors in seeking to reduce both the flow and stock of regulation. The next government must build on this legacy by:

  • Being even more transparent and consistent in its analysis of new regulations;
  • Reverting back from the one-in, two-out regime to the one-in, one-out regime – but without the large number of unnecessary exemptions;
  • Making “intelligent regulation” a core competence for the Civil Service policy profession.

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