The case of the tireless regulators

I wonder what those famously cynical private eyes Sam Spade and Philip Marlowe would have made of the new regulations which Theresa May is imposing on their British equivalents? It was announced this week that private investigators will in future have to be licensed by the Security Industry Authority, a body which has previously confined itself largely to vetting those big blokes in dark suits who glare at passers-by outside pubs in our city centres.

Those gumshoes who do not comply with the new rules may find themselves banged up in our dismal 19th-century prisons, already near to bursting with 80-year-old sex offenders, Murdoch journalists, twitter trolls and economists who take their spouses’ penalty points.

Whatever Sam and Phil would make of it, I see this as yet another bit of knee-jerk labour market regulation.

We had a problem – phone hacking – which has now largely been resolved by clarification of the legal position and the punishment of the most egregious offenders. But this has been taken as an excuse for yet more restrictions on setting up a business and employing people.

All employees must be individually licensed, undergo a CRB check and successfully undergo a formal training process (all adding costs either to the taxpayer or the PIs’ clients). The code of practice is likely to criminalise even the mildest forms of deception – something which would surely destroy the plots of the entire oeuvre of Raymond Chandler and Dashiell Hammett. Unsurprisingly for students of the political economy of regulation, the Association of British Investigators, the trade body, welcomed the new rules but said they don’t go far enough. They perhaps want to reduce the threat of new competition.

I shouldn’t be surprised, I suppose, but I was encouraged to hope that a Conservative/Lib Dem coalition which united parties which in opposition had seemed to understand the problems of our excessively regulated labour market would actually do something about it.

In reality they have flunked any proposals (like those in the Beecroft Report) for significant deregulation. All that has happened is the introduction of Employment Tribunal fees (from which many complainants will be exempt while others have fees paid by unions) and the extension of the period before unfair dismissal claims can be made (which, given the existing pattern of such claims, will have little or no impact).

Meanwhile new forms of employment regulation have been introduced, such as the Agency Workers Regulations, and others are on the cards. For instance we are hearing a lot of misinformation about zero-hours contracts and, under pressure from the Labour Party and the TUC, Vince Cable has announced an enquiry which I would imagine will lead to proposals to restrict their use. There is also a growing head of steam behind the idea of the Living Wage, which has of course the backing of Boris Johnson as well as many businesspeople who ought to know better.

And our unelected judges continue to expand the scope of existing legislation. Last week, in the case of North and Others v. Dumfries and Galloway Council, the Supreme Court expanded the range of comparators which can be used in an equal pay claim. Female classroom assistants and nursery nurses can now compare themselves with road workers, lorry drivers and refuse collectors. The effect of this will be to raise substantially the pay of women workers, and thus costs to the employer. What it will do for future employment prospects is another matter.

Thus year after year it becomes more and more costly to employ people, while opportunities for new businesses are diminished and employment becomes more difficult to find. It’s no mystery, Sherlock.

Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.