Is this a bonfire of red tape — or yet more smoke and mirrors?
If Keir Starmer is serious about cutting the costs of regulation, he needs to get serious about measuring them
Keir Starmer is the last person you can imagine going on Stars in Their Eyes. But in his big speech on Thursday he did a pretty convincing impression of Elon Musk. The prime minister complained that Whitehall was harbouring a “cottage industry of checkers and blockers”; that it’s too hard “for the most enterprising people in the country to just get on with the job”. But no more! Under Labour, compliance costs for business will fall by a quarter. Yes, a full 25 per cent.
It’s an admirable ambition. Every poll of businesses, large and small, finds that compliance and admin are an ever-growing burden. In the City, for example, the ratio of regulators to workers has roughly quadrupled since 2011 — having already risen almost 40-fold since 1980. And God knows our economy needs an injection of dynamism: the latest GDP figures have us shrinking once more, after year on year of stagnant growth.
But there are a few small problems.
The first is that, compared with what’s going on Stateside, this is pretty small beer. Musk and Donald Trump are targeting whole categories of compliance — DEI, ESG, AML, KYC. Hell, Trump has even said it’s OK to bribe foreigners again. I’m not sure folding one financial quango into another, with no planned reduction in headcount, shows quite the same drive.
The second is that, as Dominic Lawson points out, Starmer is simultaneously increasing the regulatory burden, via Angela Rayner’s Employment Rights Bill — a package of pro-union, anti-business measures so detested by the private sector that the government cannot name a single small firm that supports it.
But there’s an even bigger problem. Starmer has promised to cut compliance costs by a quarter. Yet we have no idea how much they actually are. Only one department, Defra, has a full list of the regulations it has imposed. Even when the government was deciding which European rules to keep after Brexit, there were no costs attached.
• What are Keir Starmer’s reforms — and will they be effective?
Admittedly, even if we don’t know the size of the pile, there is a system that is meant to estimate the scale of the burden we are adding to it. But that system is utterly unfit for purpose. And I can say that with some authority, as one of the few people masochistic enough to have studied it in detail.
Last year I co-authored a report for the Centre for Policy Studies think tank examining the impact assessments attached to every piece of legislation from the 2010s. We showed that the Tories’ promises to lower the burden of regulation were bunkum — in fact, the official estimates demonstrated that costs rose by £6 billion a year.
But we also showed that those numbers were wildly, woefully out. It was clear from the assessments, and from conversations within Whitehall, that the estimates were too often done at the last minute, by the most junior people in the office, to justify decisions that had already been made.
Take MiFID II, a massive set of reforms to the financial markets introduced while we were still in the European Union. Anyone in the City would put the annual cost to the UK well into the billions. But the official estimate is just £105.2 million a year. Except that it isn’t, because the form was filled in wrongly. So the government’s official position is that legislation widely blamed for wrecking the financial research industry in fact brings annual benefits to the economy of £105.20.
Or what about the second staircase rules brought in after Grenfell to make evacuation easier? A noble and necessary measure, you might think.
Except that the Grenfell inquiry did not actually recommend second staircases. And the impact assessment could not find evidence of a single life, anywhere, that would have been saved — not least because fire brigade practices in buildings under 50m tall “are effective to the point that mass evacuation via the stairwell is an extremely rare occurrence”. Yet the Tories not only introduced the requirement but unilaterally lowered the height limit for second staircases from 30m to 18m.
But this, too, isn’t the end of the story. Because the impact assessment included the cost of building the additional staircases. But not of the floor space, and flats, that would be lost to make room. It glibly claimed the towers could be made wider or taller. Which is not, to say the least, how our planning system works.
In truth, once you ran the numbers properly, the estimated annual cost of £268 million was closer to £2 billion. But there was no way for builders to challenge the figures. The result has been fewer new homes, an effective ban on the construction of traditional mansion blocks over that 18m threshold — and long months of frozen construction, across England, as the consultation dragged on.
If Starmer is serious about cutting the costs of regulation, he needs to get serious about measuring them. That means, as our report set out, a complete transformation of how Whitehall thinks about regulation — putting the costs front and centre, getting independent estimates rather than letting departments mark their own homework, and much more. It means eliminating scams like the plastic bag trick, in which civil servants rebadged the obligation for customers to save the planet by paying for their shopping bags as a deregulatory measure — think of the savings for the supermarkets! — and magically met their targets for slashing red tape as a result.
Above all, it means changing how ministers think — and what they are rewarded for. Because the problem is not just over-mighty regulators, but politicians whose positive headlines — and cabinet careers — depend on being seen as legislative dynamos, constantly responding to the latest clamour that something (anything!) must be done about the problem of the day, whatever the cost.
Will Starmer be able to turn things round? Well, here’s a final case study: his own Employment Rights Bill, nodded through the House of Commons on the very same day as his big speech on deregulation.
The impact assessment says it will cost business between £0.9 billion and £4.5 billion a year. But the independent Regulatory Policy Committee says those estimates are garbage. It “red-rated” seven of the 23 sub-assessments for the bill, including many of the most important. As a result, it declared the overall assessment “not fit for purpose”, not least because key costs were missing entirely.
Starmer is absolutely right that Britain’s addiction to regulation is a drag on growth. But his government has done nothing but increase the burden on the private sector — with disastrous economic consequences.
As for making a speech promising to cut compliance costs on the same day that his party blithely votes through a massive hike in them without even pausing to get an accurate estimate? There’s a word for that. But not one I can use in print.
