Bad, a joke or both? The government promises £1bn to business in new deregulation drive

The government is reviewing EU regulations that were incorporated into UK law as we left.

Boris Johnson’s government has a political identity crisis. It is torn between two different visions for the UK, which reflect the contradictions of the original Brexit vote in 2016.

Whereas for its supporters in the Conservative parliamentary party Brexit is an opportunity for radical deregulation, this point of view was never shared by the majority of Brexit voters. This is especially the case for the electorally significant group of former Labour voters that switched to the Conservative Party in 2017 and 2019.

Johnson has attempted to carefully position his government in a way that can straddle these different groups. For the most part, he has rejected austerity politics. But he still talks up the potential opportunities for UK divergence from EU regulation.

The resignation of David Frost in December last year, who argued that the government was not doing enough to create a ‘lightly regulated, low-tax, entrepreneurial economy’ was a sign of the disquiet amongst conventional Conservatives at Johnson’s seemingly more centre-left, ‘tax and spend’-style economic policy.

Government sets target of cuts to ‘red tape’ worth £1 billion to business
In part to assuage these concerns within Toryism, and shore up his flagging support in the parliamentary party, the government has recently committed to ‘cutting red tape’ to deliver £1 billion of savings for British companies.

How seriously should we take this goal?

On one level, the idea of Brexit cutting red tape for business is a bit of a joke. UK-based businesses selling goods and services to the EU have faced a massive increase in costs as a result of the need to comply with an avalanche of new customs and regulatory rules. This has been calculated as 8% – 9% of the value of UK exports to the EU – around £25 billion a year. So, that’s 25 times the costs of the government’s £1 billion deregulation pledge.

What’s more, changes in regulations that mean businesses have to comply with two sets of rules, one for working in the UK, the other for working in the EU, also adds expenses. The chemicals industry (that represents 16% of UK exports to the EU) has put the administrative cost of a new UK system for regulation at around £1 billion a year. As many have argued, it still seems highly unlikely that any amount of deregulation could ever offset these extra costs.

On another level, we should still be concerned about the government’s new goals on deregulation and a ‘bonfire of red tape’. These are rules that exist to defend consumers, citizens and workers, and standardise practices across a sector. From ensuring our health and safety, upholding labour rights to conserving the environment, good regulations secure the public interest, protecting society from socially and ecologically damaging practices.

The current government has at least rejected a return to the Cameron-era policy of ‘one in one out’, which required departments to lose a regulation for every new rule introduced. They have argued that this would not be ‘consistent with delivering world-class regulation’, ‘adapting to a new wave of technological revolution or to achieving net zero’.

True, enough.

Yet, this rather illustrates the problem with unspecified appeals to deregulation in the name of reducing business costs. If a particular rule is unnecessary or socially damaging in some way it should be abolished. But cutting ‘red tape’ for the sake of it will simply encourage the predatory capitalism that has long been associated with the UK’s broken economy. The clamour of Conservative MPs pushing for a return to these policies is a cause for concern.