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Roula Khalaf, Editor of the FT, selects her favorite stories in this weekly newspaper.
The anger was sparked by Rachel Reeves’ demand that the authorities do more to support the economy. Consumer groups fear losing coverage; unscrupulous lawyers mutter soothsayers; Government departments are moving to avoid cutting the organizations they support financially. Others, meanwhile, have taken the opportunity to issue dark warnings about the one-touch law that fanned the flames of the 2008 crash.
The Chancellor is right. Light touch regulation is not Britain’s current problem. In fact, management has been one of our few consistently reliable industries. There is no tension between economics and smart regulation that prevents monopoly, keeps markets competitive and encourages capital formation. But in too many cases, we have the opposite: ever-changing laws that businesses struggle to keep up with; the complexity that creates the positions of lobbyists; and the natural mission ascends.
Hundreds of licensed high-rise buildings are now standing empty, as the Building Safety Regulator struggles to process them, eight years after the tragic Grenfell Tower fire. The Financial Conduct Authority, which failed to detect the Woodford scandal despite warnings from former City minister Paul Myners, appears desperate to impose diversity rules on companies, with a strong effort to prevent groupthink. Regardless of what you thought of the CMA’s decision on Microsoft’s bid to take over the games company, the months it spent reviewing it were not pleasant.
There is a lot of room for improvement. But although changing the chairman (who was Boston Consulting Group) for another (ex-Amazon, ex-McKinsey) can bring a different culture to CMA, it is not a long-term solution. While some of these organizations are clearly failing, many are only as good as the money they are given, by the politicians who created them. The reason the UK has the highest electricity prices in Europe, crippling producers, is that old officials use energy regulation to promote their environmental agendas.
Reeves’ instinct is that “the balance has gone too far in terms of risk management”. One reason is because Whitehall itself is harmless. Officials, eager to take risks, tend to push too many people into Westminster’s vast arms-length corridors. Sponsoring agencies, on the other hand, are often reluctant to scrutinize how they are doing: making nonsense of monitoring plans, five-year reviews and impact assessments. But the priests also ignore the danger; and they are especially prone to “Something Must Be Done”-ery. A classic example was in 2000, when the response to the horrendous Hatfield train disaster was to introduce safety regulations that caused chaos and were so expensive that they appreciated the life of a train passenger is more than a hundred times that of one in a car. .
In 2015, when I was working in Downing Street, I was surprised to find that the Whitehall department I was dealing with did not have a list of policies it was responsible for. I asked a senior adviser what had happened to the “bonfire of the quangos” that George Osborne had started five years earlier. At first angry at my skepticism, he finally admitted that even though some claims had been made, the system had been pushed back, and the result was a small fire like a small spark. In 2021, the Public Finance Committee found that the spending of those organizations has tripled; and Meg Hillier, chair of the Labor PAC, challenged the government of the day to explain why they had been established in the first place.
Britain used to be good at smart management. The creation of regulatory sandboxes, and the rapid spread of the Covid-19 vaccine, show that we still can. But the government also needs to ask itself the hard questions about what the government is for, and why we need organizations with confusing meeting conditions. Do we really need Ofgem and the National Energy System Operator? The Environment Agency and Natural England? When Great British Railways starts, what will be the point of the Office of Rail and Road?
Sir Dieter Helm, a professor of economic policy at the University of Oxford, argues that the management of energy and water has become too complex. He suggested that they be managed as a network, with one administrator. That would be a more effective method. And unless we can adapt our regulatory systems to better serve their purposes, how will Britain ever be agile enough to deal with the development of AI, or synthetic drugs?
You don’t have to be a raving libertarian to feel that Reeves is on the right track. Of course the problem is the dissonance between what the chancellor and the business secretary say, and what the government actually does. It creates a large number of arms-length new bodies. And it is about to introduce new labor regulations, many of which will not work. Just one sentence of the package will cause every pub to be sued by their staff and customers – because its requirement for employers to protect their staff from abuse will be in direct conflict with consumers’ right to free speech.
There is still time to fix this. But politicians who want bureaucrats to stay out of the loop must restrain their instincts from interfering. That doesn’t come easily.
